Net Worth – Apr 2010

A caution on this net worth post.  When I make my comparison I always use the last update number, but in this case I’m referring to my Feb update, not the mini update I did with the cross over post.  So all increases are from the Feb to April period.

Assets

House $331,200
RRSP $24,600
LIRA $10,600
TFSA $8,300
Pension $20,900
Wife’s RRSP $12,500
Wife’s Investment Account $12,900
Wife’s TFSA $7,300
My Investment Account $6,700
High Interest Savings Account $7,000

Debt
Mortgage $103,500
HELOC $0

Therefore my net worth now stands at $338,500 for the end of April 2010. That is an increase of $15,700 or 4.9% from my last update.  Of that my investment net worth was $110,800 which was an increase of $6,800 or 6.5%.  Mortgage is down by $17,700 or 41% of my goal for 2010.

So a few general notes about all of this.  As I touched on yesterday I’ve frozen my house value in these updates until the housing market calms down a bit.  I’m concerned about getting another bubble effect in my net worth (see graphs for when it happened in 2008). In the mean time the equity markets continue to give me a steady return.  Not huge like some of the 2009 updates, but I can live with steady.

I keep trucking along on my mortgage goal and I’m 41% done already for the year.  Yet I’ve hit a bit of a brick wall on that one.  I’m almost out of prepayment room until my renewal date hits in May or June (I can’t recall which).  As such I might get a bit of money sitting in savings in the next update waiting to hit the mortgage.  It’s interesting to note that would mean I’ve paid off in total almost 15% of my original mortgage amount in a single year with prepayments (in addition to regular payments).  It’s really amazing what you can get done when you put your mind to it.

Any questions?

canadian_dreams_net_worth_apr_2010canadian_dreams_investments_apr 2010

Since When Did I Move to an Upscale Area?

I’m seeing lots of ‘for sale’ signs in the city lately, but apparently this is common right now.  What is some what weird is the huge variation on pricing I’m starting to see on some listings in Regina.  For example, there is a similar size house not to far from me listed for $380,000, then another house with about 100 extra sq ft going for $440,000.  Trust me when I say I looked at the pictures for both places and they are not that different inside.

So what the hell is going on?  I suspect we are hitting another housing fever similar to the spring of 2008 when my house value went through the roof and then crashed back down afterward.  If you are curious what that looked like go check out any net worth post with graphs you can see what the bubble of house value did to my net worth.  What gets me about this every time housing values get near the $400,000 range is I feel like I moved to an upscale area, but I didn’t leave my house.  I keep looking around and thinking ‘you paid WHAT for that?’ Even with adjusting for inflation 2% per year my house should only be worth about $205,000 from what I paid for it.

What’s really interesting to me about this is when I talk to any of the new neighbours they are not much different than us.  They make a decant living, but they are not rich.  So how are people paying for these over priced houses?  Good old fashion debt and lots of it.  This is then driving two interesting consequences: one we have a lot of people who are vulnerable to interest rate increases over a five year cycle and second that’s a lot of potential retirement savings being used to pay the mortgage.  No wonder retirement savings rates and balances are crap in Canada.  We are putting everything we have into our houses.

So is this the classic case of unintended consequences in action?  Perhaps the plan to encourage home ownership and boost economic activity, but over the long haul all the government has encouraged is making a mortgage payment instead of making an RRSP contribution.  The net result is we aren’t actually increasing the GDP, we are just moving future home ownership from the future to now and getting a short term boost. Over the long run the banks will do well on mortgages but everyone else won’t be doing much other than paying the mortgage.

At the end of the day I’m thankful for buying what I did when I did it.  That way I won’t be stuck paying off debt for the next decade or two.  I do feel sorry for anyone who is getting in right now since they are losing so much of their future freedom to just a mortgage payment.

In order to keep this from again causing a little bubble in my net worth I’m freezing my house valuation at the Feb. level.  If it goes down from there I’ll adjust it, but I won’t be taking it up.  I might remove the freeze after things settle down again.

So how’s the housing market in your part of the world?  Are they just as over priced as here or have you already seen your peak and are heading down?