Housing

[msj]

If you were to invest in riskier schemes with potential capital gain, then you would be hit with a capital gains tax.

And capital gains tax is 50% of regular tax rates - so tax of 10% to 22%.

If you earn a capital gain within a RRSP you will pay tax at 20% to 44% when you pull it out of the RRSP.

Baby Boomers are starting to realize that RRSP's really are just "future" tax liabilities. And the future has arrived.

Just saying: one needs to understand how taxes apply to different tax saving vehicles and different sources of income (interest income is taxed at 20% to 44%, dividends can be anywhere from negative [yes, negative] 12% to positive 31%).

I'd rather defer a large capital gain for 20 years in a non-registered account (or a TFSA) than in my RRSP account.

But I would rather take a tax deduction and earn interest income in my RRSP account (with the exception of my "emergency savings" that are held in a TFSA).

Knowing all of this and understanding when to buy a home can be very beneficial for the home buyer.

Property taxes and maintenance are presumably included in the rent. IOW, most landlords are not operating a charity. They expect a reasonable return on their investment.

I see lots of rentals since I do up tax returns.

Many people get involved in rentals for the potential capital gains.

People who are rich get involved in rentals for the income.

An important distinction that too many foolish people don't understand.

Currently, I rent.

But I would be nuts not to - my landlord is receiving less rent from me than the interest he is paying on his "investment."

Add in strata fees, property tax, and maintenance (although it is a brand new condo so not much yet), and he is banking on a capital gain.

Which is strange since the cost of our unit is 32 times our annual rent.

For those who watch fundamentals, that's about 2.5 standard deviations above normal.

I mean, would you pay 32 times earnings for, say, Royal Bank stock?

No, you would pay between 10 and 15 times.

And that's why I rent (well, among other reasons that are non-financial).

But you make a good point. There are costs associated with home ownership that many people ignore.

My argument in favour of buying a home in Canada hinged on two tax advantages. 1. You pay no capital gains tax on a principal residence. 2. The benefit you receive from your home investment is not taxed. Unless they are sheltered in an RRSP or TFSA, you pay tax on any investment income.

The two reasons are the tax free principal residence exemption you mention and the fact that you can use up to 95% leverage (now days) for your "investment."

Of course, price is another factor which effects when one should buy their own house.

When house prices are 3 to 4 times median income levels then by all means it's time to buy.

When they are 6+ times median income levels then not so much.

To see this, compare Kimmy and August whose rich uncle Barack dies and leaves each of them $300,000. August uses his inheritance to buy a $300,000 house and lives in it. Kimmy invests her $300,000 at 4% and uses the interest income ($12,000 annually) to pay rent - but Kimmy first has to pay income tax on that $12,000. If Kimmy is in a 30% tax bracket, she'll only have about $8,000 for rent.

-----

Of course, if Kimmy is paying tax at a 30% rate then she is already earning somewhere between $41,000 and $83,000. I think she could afford to pay the rent and the income taxes.

But we could come up with all kinds of scenarios for or against buying a home.

We need to know things like: tax rates, investment rate of return, price of the home, what the home will be worth when it is sold, will there be a replacement property purchased and at what cost, maintenance costs, property tax costs, etc....

Where I live, given that homes are selling at 32 times the annual rent and at what I can reasonable estimate to be at least 7+ times the median income, I think one would be nuts to buy in such a scenario.

Your arguments about rising/falling house prices are valid but apply to all investments. In Canada, in general, real estate has been a good investment. In addition, the local real estate market is easy for most people to research and understand. A key factor in a house price is location and most people know well the features/characteristics of their city.

Yeah, ask Americans living in Florida or Nevada or California about they "investment" in housing and whether they wished they either did not buy or, if they already owned, sold out in, say, 2006.

As for people understanding their local RE market - nonsense.

If people did then Vancouver houses would not be selling at 12+ times median income.

Parts of the US would not have sold at 10 times median income in 2006 only to fall to 3 or 4 times income today.

This is like expecting people to understand why they bought Nortel at $120 per share.

The reason was: everyone else is doing it and the price only goes up.

Of course, until the price doesn't go up anymore and then everyone else is selling on the way down.

Now, RE is not the same as stocks since it is rare for RE to go down to zero.

A good place to understand Canadian RE market fundamentals is here: Why Rent?, Bubbles 1 and 2, lets not forget about potential for Subprime Canada and we should consider what the popular beliefs are about increasing house prices compared to the real reasons they are so ridiculous.

[Bonam]

If people did then Vancouver houses would not be selling at 12+ times median income.

The reason Vancouver housing prices are so high and keep rising is the continual upward pressure from investors in China and elsewhere in Asia, not so much the locals bidding up the price.

Edited August 13, 2011 by Bonam

[msj]

The reason Vancouver housing prices are so high and keep rising is the continual upward pressure from investors in China and elsewhere in Asia, not so much the locals bidding up the price.

Whether it is or not, and I don't think it is, it still proves just how irrational people are.

Why would you buy an overpriced place in Vancouver when you can get something at a better fundamental price somewhere else?

It's a rhetorical question, of course, since people don't buy RE based on fundamentals. They buy based on emotion; hence, bubble markets like Vancouver.

[Bonam]

Whether it is or not, and I don't think it is, it still proves just how irrational people are.

Why would you buy an overpriced place in Vancouver when you can get something at a better fundamental price somewhere else?

It's a rhetorical question, of course, since people don't buy RE based on fundamentals. They buy based on emotion; hence, bubble markets like Vancouver.

People, except for a small minority, do everything based on emotion, whether it's buying real estate or otherwise. But to answer your question of why you would buy real estate in Vancouver or in other overpriced locations... maybe because you live and work there, and want the kind of lifestyle that is associated with living in your own detached home? Investments and returns can be important considerations, but for most people, the selection of their primary residence based on convenience, location, appeal, etc, is more important.

In other words, not everyone is a millionaire hoping to invest in real estate markets for money. Most people just want to buy a house in the city they grew up in. Duh.

Doesn't take a rocket scientist to figure that one out.

Edited August 13, 2011 by Bonam

[msj]

People, except for a small minority, do everything based on emotion, whether it's buying real estate or otherwise. But to answer your question of why you would buy real estate in Vancouver or in other overpriced locations... maybe because you live and work there, and want the kind of lifestyle that is associated with living in your own detached home? Investments and returns can be important considerations, but for most people, the selection of their primary residence based on convenience, location, appeal, etc, is more important.

In other words, not everyone is a millionaire hoping to invest in real estate markets for money. Most people just want to buy a house in the city they grew up in. Duh.

Doesn't take a rocket scientist to figure that one out.

Well, I grew up in Vancouver and I don't want to buy a house there. At least not at 20 to 25 times personal disposable income.

These people are fools.

Homes are all about conspicuous consumption.

Any rational person knows that in Vancouver most of the people are paying 50%+ of their income to mortgage payments. That's enslavement and a foolish amount of risk to take.

IOW, it's an illusionary lifestyle based on indebtedness.

Yes, one can rent in the market if one so chooses and I happen to know quite a few people who do this because they "must" live in "their hometown."

I enjoy a similar lifestyle across the pond with some important differences: my only debt is tax deductible and will be completely gone next year (investment in my business).

And, when the fundamentals return to a more normal level I will be able to buy a house, likely with 50% to 60% down and be able to pay off the mortgage within 5 years while still enjoying the vacations, ski trips, and yoga retreats that I currently do.

It's a hard life but that's the price one has to pay to not live in their hometown.

Edited August 13, 2011 by msj

[pinko]

Well, I grew up in Vancouver and I don't want to buy a house there. At least not at 20 to 25 times personal disposable income.

These people are fools.

Homes are all about conspicuous consumption.

Any rational person knows that in Vancouver most of the people are paying 50%+ of their income to mortgage payments. That's enslavement and a foolish amount of risk to take.

IOW, it's an illusionary lifestyle based on indebtedness.

Yes, one can rent in the market if one so chooses and I happen to know quite a few people who do this because they "must" live in "their hometown."

I enjoy a similar lifestyle across the pond with some important differences: my only debt is tax deductible and will be completely gone next year (investment in my business).

And, when the fundamentals return to a more normal level I will be able to buy a house, likely with 50% to 60% down and be able to pay off the mortgage within 5 years while still enjoying the vacations, ski trips, and yoga retreats that I currently do.

It's a hard life but that's the price one has to pay to not live in their hometown.

You make some good points. Would you not agree that Vancouver is somewhat of an anomaly?

Edited August 13, 2011 by pinko

[Oleg Bach]

On the wealthy side of a lake I lived on they built a subdivision- all the homes were in the 2 million range - occupied by Asians..we used to call them the three generation mortgage deals. Give it enough time and the families will be huddled into one room cooking on a camp stove - just like back home.

[kimmy]

A good place to understand Canadian RE market fundamentals is here: Why Rent?, Bubbles 1 and 2, lets not forget about potential for Subprime Canada and we should consider what the popular beliefs are about increasing house prices compared to the real reasons they are so ridiculous.

Thanks a ton, msj, for the excellent information!

I read a bunch of articles from that site... they tended to back up my general misgivings about real-estate prices with facts.

The one that really caught my eye was this one:

What's driving housing price increases in Canada?

My position has long been that the driver of house price appreciation in Canada over the past decade has been primarily the result of the unprecedented expansion in debt caused by the loosening of CMHC mortgage insurance requirements and the removal of the maximum insurable mortgage ceiling....facilitated by a falling interest rate environment, a new mass perception of the 'investment worthiness' of real estate as an asset class, and the emergence of housing as a form of conspicuous consumption. But if we boiled them all down into one word, it would be this: DEBT! And the pace of debt accumulation is not sustainable... ergo, the pace of house price appreciation is not sustainable. Nor are house prices at current levels relative to underlying fundamentals.

Buying might or might not make financial sense right now, but I have become pretty convinced that stories like Bubber's, or my parents, or anybody else who bought homes 10 or more years ago-- homes that double in value within a decade-- aren't going to happen for people who are buying homes in major Canadian cities at current prices.

-k

[msj]

You make some good points. Would you not agree that Vancouver is somewhat of an anomaly?

Yes, it isn't nearly as bad in Victoria (14 to 16 times), Calgary (9 to 10 times), Edmonton (9 times), or Toronto (12 to 14 times).

Of course, after Vancouver, these are likely the most overpriced markets in Canada.

And, all of them together probably include roughly 50% of Canada's population.

But no, there is nothing to see in Canada. No bubble here...

[msj]

Thanks a ton, msj, for the excellent information!

You're welcome. It really is some excellent information and getting it on Canada, rather than the US, is a really nice change.

Buying might or might not make financial sense right now, but I have become pretty convinced that stories like Bubber's, or my parents, or anybody else who bought homes 10 or more years ago-- homes that double in value within a decade-- aren't going to happen for people who are buying homes in major Canadian cities at current prices.

-k

Exactly - it all depends on your circumstances and where you choose to live.

To expect to buy a house in Vancouver, Victoria, Toronto or even Calgary or Edmonton and realize a real increase in value over the next ten years is unlikely.

But so many people look back over the last ten years and see that their houses are worth more so it must continue on upwards, right?

One day, RE will revert to the mean, and what that means is that RE prices will increase less than the rate of inflation, and so many people who have put far too many eggs in one large basket will want to get some liquidity.

The problem being that it takes time to sell a home, even when you set the price right. And there are large transaction fees and sometimes even mortgage fees to be paid.

So, the herd will turn, one day, and say "baaaa" as they move in the other direction.

The fact that so many will go on about the virtues of home ownership at a time when the prices are at absurd levels in so many parts of Canada should give you some comfort that the end is nearer.

[kimmy]

Do you know where I can find similar information for a larger list of cities?

-k

[Bonam]

You're welcome. It really is some excellent information and getting it on Canada, rather than the US, is a really nice change.

Exactly - it all depends on your circumstances and where you choose to live.

To expect to buy a house in Vancouver, Victoria, Toronto or even Calgary or Edmonton and realize a real increase in value over the next ten years is unlikely.

But so many people look back over the last ten years and see that their houses are worth more so it must continue on upwards, right?

If someone chooses to buy a primary residence in Vancouver for, say, $2 million, that is because that person values having that primary residence in that location as being worth $2 million. I think you are making a real mistake in your analysis by not making a clear distinction between people buying a place to live, and people buying investment property. Many people buying a home never plan to sell it at all, they may well expect to live out their lives in it. For them, a decline in value after purchase just means paying a lower property tax. The sets of considerations and realities for these two groups are quite different.

One day, RE will revert to the mean, and what that means is that RE prices will increase less than the rate of inflation, and so many people who have put far too many eggs in one large basket will want to get some liquidity.

The problem being that it takes time to sell a home, even when you set the price right. And there are large transaction fees and sometimes even mortgage fees to be paid.

You don't sell your home to "increase liquidity". You sell your home if you no longer plan to live there or can no longer afford to live there. By the way, if you want to increase your liquidity, you can use a HELOC. Again, you are using the considerations of a real estate investor, not an average person living in a home.

Don't get me wrong, you make good points and have provided interesting links and data. I just think you are forgetting some of the reasons people buy homes though. It's not all about the monetary return of the investment. If someone wants to live in an expensive city, and can afford to buy a home there, the eventual return on the investment should they ever sell the house may not particularly be on their mind.

[msj]

Do you know where I can find similar information for a larger list of cities?

-k

I look at the largest cities in Canada. I look to my local real estate board (Vancouver Island Real Estate Board) and look at their stats for the local markets where I live.

I'm a tax accountant so I have a pretty good idea what a typical household makes but I think you can get that information from Stats Canada if you need to.

I also check things out on a province by province basis.

Usually, I come across this information in different ways (David Rosenberg from Gluskin Sheff) or the odd Garth Turner posting (he is more humourous than serious, imv).

It looks like Ben Rabidoux's site is a serious look at Canadian real estate and I'm just really getting into his primer articles.

[kimmy]

If someone chooses to buy a primary residence in Vancouver for, say, $2 million, that is because that person values having that primary residence in that location as being worth $2 million. I think you are making a real mistake in your analysis by not making a clear distinction between people buying a place to live, and people buying investment property. Many people buying a home never plan to sell it at all, they may well expect to live out their lives in it. For them, a decline in value after purchase just means paying a lower property tax. The sets of considerations and realities for these two groups are quite different.

Someone might plan on living out their life in the home they're buying, but plans change.

Suppose I buy a home today for $180,000 (that's a typical price for a 1br condo in the city I live in right now) and a "market correction" happens in a year or two and it's only worth $150,000 afterward. What happens if I have to sell (lost my job, have to move to another city, get married, have kids, etc)? I sell for $150,000 and lose $30,000 plus commissions and closing costs etc. So I've incurred a loss of over $30,000 plus closing costs and realtor commissions and stuff like that.

There's potential to do yourself serious financial damage if you buy high and are forced to sell at a not-opportune time.

-k

[Bonam]

Someone might plan on living out their life in the home they're buying, but plans change.

Suppose I buy a home today for $180,000 (that's a typical price for a 1br condo in the city I live in right now) and a "market correction" happens in a year or two and it's only worth $150,000 afterward. What happens if I have to sell (lost my job, have to move to another city, get married, have kids, etc)? I sell for $150,000 and lose $30,000 plus commissions and closing costs etc. So I've incurred a loss of over $30,000 plus closing costs and realtor commissions and stuff like that.

There's potential to do yourself serious financial damage if you buy high and are forced to sell at a not-opportune time.

-k

I understand all that. I'm no stranger to risk analysis.

For many, the chance of that $30k (or even larger) loss may be well worth owning their own home. There are differences in lifestyle between renting and owning.

Edited August 13, 2011 by Bonam

[msj]

If someone chooses to buy a primary residence in Vancouver for, say, $2 million, that is because that person values having that primary residence in that location as being worth $2 million. I think you are making a real mistake in your analysis by not making a clear distinction between people buying a place to live, and people buying investment property. Many people buying a home never plan to sell it at all, they may well expect to live out their lives in it. For them, a decline in value after purchase just means paying a lower property tax. The sets of considerations and realities for these two groups are quite different.

Really? So if you knew with certainty that you could buy a $2 million home today versus renting a nice home and buying in, say, 5 years for, say $1.5 million, you would take it?

Sure, I might take that offer too - maybe I don't want to move in five years, maybe I don't want the pain of renting etc...

But even if you plan on living out your life and you honestly don't care about leaving an estate behind, well, I just don't think there are that many people who don't care about the value of their homes whether they will sell it or not.

As for lower property tax - property tax is a function of property values and the tax rate - or at least that's what people believe.

In reality, property taxes are based on how much money the municipality needs. That's how property taxes are really determined.

You don't sell your home to "increase liquidity". You sell your home if you no longer plan to live there or can no longer afford to live there. By the way, if you want to increase your liquidity, you can use a HELOC. Again, you are using the considerations of a real estate investor, not an average person living in a home.

Don't get me wrong, you make good points and have provided interesting links and data. I just think you are forgetting some of the reasons people buy homes though. It's not all about the monetary return of the investment. If someone wants to live in an expensive city, and can afford to buy a home there, the eventual return on the investment should they ever sell the house may not particularly be on their mind.

People choose to sell their homes and rent for many reasons.

Given that baby boomers who are hitting retirement age do not have that much in liquid assets, and given that most of what they are sitting on are tax liabilities, I think people are going to be surprised just how much liquidity they are going to need during their retirement.

Yes, a person can sell their home for a $1 million dollars and live on that and their meager savings for the rest of their life. Even as they downsize and buy a cheaper place to live or choose to keep the money invested.

These are important options that people need to consider especially when so many housing markets and so many people are looking at what could be peaks in value.

Let's get back to that $2 million house in Vancouver - if I'm 65 and that represents 80% of my net worth (and it likely would) I think I would sell it and rent.

After all, it's easier to spend all of your net worth before you die when it is converted into something that is easy to spend.

When the housing market turns south it will not be easy to sell that home if one wants to or not.

And that person may be kicking himself for not taking advantage of a peak (or even a near peak) in selling prices to bank away the equity.

The problem with housing nuts is they always think that opportunity costs favour ownership especially if one is going to live in the house until they die.

That's not even close to being right as many people have seen in the US and many will see in Canada.

[Bonam]

Really? So if you knew with certainty that you could buy a $2 million home today versus renting a nice home and buying in, say, 5 years for, say $1.5 million, you would take it?

If I knew with certainty that the price would decline in value to $1.5 million in 5 years, no, I'd wait. But we don't know that with certainty. There is a chance the house will fall in value, a chance it will remain roughly constant, and a chance it will continue to increase. I haven't heard of a single investor who can accurately and consistently time the market.

[msj]

If I knew with certainty that the price would decline in value to $1.5 million in 5 years, no, I'd wait. But we don't know that with certainty. There is a chance the house will fall in value, a chance it will remain roughly constant, and a chance it will continue to increase. I haven't heard of a single investor who can accurately and consistently time the market.

Of course it is about chance.

And when the market fundamentals are two or more standard of deviations from the norm (as Vancouver certainly is) then its a good idea to bet accordingly.

If I were a baby boomer I would rather have too much cash than too much house because one of these days some of them are going to wake up and realize there is no point owning a $2 million house when you only have $500,000 in savings (of which, $100,000 will be used to pay taxes), and you earn $6,400 per year in OAS and maybe $7,500 per year in CPP.

But I would bet very few are putting pen to paper to truly appreciate what their cash flow will be like during their "golden years."

Just like few people put pen to paper during their working years.

[Thorn]

I understand all that. I'm no stranger to risk analysis.

For many, the chance of that $30k (or even larger) loss may be well worth owning their own home. There are differences in lifestyle between renting and owning.

My family rented all my life, and I rented into my thirties. They were your average, middle-class townhouses and apartments. In other words, they were bland and crappy boxes. My last rental was an unremarkable 3br apartment at $1100 a month. I bought a bungalow for $200k which has class and character, and a large back yard. I planted trees and a long cedar hedge which is now going on fifteen feet all around the yard. I have a pool, a deck, and a gorgeous neighborhood which is quiet and peaceful. No more cop cars showing up, no more fire alarms going off, no more buses going up and down the street.

Want to know my first odd moment after I bought the place? When I realized I didn't have to paint things the same neutral colours as had existed in all the apartments and houses I'd lived in to that point in time. I could paint the rooms whatever the hell damned colour I wanted to. Didn't like the light fixtures? Replace them with those I do like! Want to rip out the bathroom and redo it? Sure! I did just that!

It's a different lifestyle, and that's worth a hell of a lot more than a few bucks more when you're old and gray.

Btw, I gave a down payment of about $75k. That was money which had been in stocks and bonds, and I took it out of the stock market a year before there was a huge fall. My house is now valued at about $350k, and I don't regret a thing.

[Bonam]

Btw, I gave a down payment of about $75k. That was money which had been in stocks and bonds, and I took it out of the stock market a year before there was a huge fall. My house is now valued at about $350k, and I don't regret a thing.

Definitely. And based on your story, it sounds like you wouldn't regret it even if your house was still worth $200k. Or even if it had gone down to say $150k. Which was my whole point before when talking with msj. Thanks for illustrating it

[msj]

Btw, I gave a down payment of about $75k. That was money which had been in stocks and bonds, and I took it out of the stock market a year before there was a huge fall. My house is now valued at about $350k, and I don't regret a thing.

Yes, there are times it makes sense to buy.

When the market you're living in is selling at 32 times annual rent, well, that is not a smart time to buy a house.

If I lived in a market that was selling at 15 to 20 times annual rent then I would be an owner.

That`s the distinction that you house nuts aren't getting.

And keep in mind that the average price (for a detached house) in 416 has dropped by $176,000 since May 15th (a 22% decline).

PDF - May

PDF - August

Let's hope that this is a statistical anomaly rather than the beginning of a trend.

Edited August 18, 2011 by msj

[TimG]

If I lived in a market that was selling at 15 to 20 times annual rent then I would be an owner.

Where do you get that "rule of thumb" from?

[msj]

Where do you get that "rule of thumb" from?

I have seen it in many places. I have also given it some thought (pen and paper in hand - or, rather a spreadsheet) and done the math.

It's kinda like P/E ratio's on stocks.

I mean, think about it: if I put 10% down the mortgage interest alone, even at historically low rates, is still more than my monthly rent. Then add another several hundred per month on for strata fees, then another few hundred for property tax, and add on some more for principal repayment.

The cash flow (never mind losing the opportunity cost on that 10% down payment) is clearly at least twice my monthly rent.

Is the condo price going to appreciate enough to make up for this?

Well, not likely, and even if it did, I would likely just be selling and then buying within the same house market so it wouldn't matter much (if at all).

Remember, house values have gone up and up faster than CPI and faster than wage gains. How much longer do you think that this is going to continue?

Or do you think that incomes are, all of a sudden, going to rise faster than house prices?

Run some numbers and you will see that 32 times is very rich and the numbers in the graph linked below are very reasonable.

link

Note that one still has to be careful when using this metric, particularly as prices swing wildly up and down.

----------------------

For some reason I am amazed at how ignorant people are of "fundamentals."

We see this time and time again: some market (internet bubble, subprime bubble, house bubble) expands out of proportion to historic metrics and, yet, people seem to be surprised that these metrics even exist.

The problem is that there is no history taught within economics or statistics.

[msj]

I will also link to a Canadian source who has some tips for Canadian home owners:

Price to rent ratio- Ben suggests this formula to determine if you might be better off renting than owning your home. First, check rental listings to figure out what the monthly rent would be on a comparable dwelling in your neighbourhood. Multiply this by 12 to get the annual rent. Estimate the value of your home (Ben suggests chopping five percent off of your assessment to account for owners' overestimation). Now divide the house price by the annual rent. If you arrive at a number less than 20, then you're in good shape to stay put. If your number is between 20-30, you might want to think about selling and renting. If it's over 30, you are paying too much for the luxury of owning.

I should clarify on this point. I have suggested these ratios as very rough guidelines. But any market that has a price/rent ratio over 30 is exceptionally overvalued. I would absolutely call that a bubble. For reference, at the height of the US bubble in 2005, there were only 11 cities in the US with price/rent ratios above 30. All of them have fallen hard, and there is a very clear correlation between the price/rent ratio and the extent to which house prices have fallen in the US. We’ll look at some Canadian cities later in the week to see how we stack up, but I’ll let the cat out of the bag: Look out Vancouver and Victoria. They would rank within the top 10 most overvalued US (pre bubble) cities by this metric.

Source

I would recommend reading through the archives on that site for further info on this subject.

[TimG]

Is the condo price going to appreciate enough to make up for this?

The trouble is you are assuming that the average person is likely to get something resembling a return on their investments. How many people have made money on mutual funds purchases over the last 10-15 years? Sure some would have made money if they timed it perfectly but what if contributions were made based on consumer sentiment (i.e. buying during a bull and staying on the sidelines during a bear).

You also ignore the intangible value of a owning your own home. When I rented I was forced to move because the landlord sold the place. No forced moves with my own place. That is worth something.