Personal Finance

Another real estate bubble?

  • Last Updated:
  • Dec 17th, 2013 5:22 pm
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Poll: Are we in a 2nd real estate bubble?

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[OP]
Member
Jun 13, 2006
311 posts
31 upvotes
Ontario

Another real estate bubble?

After a mostly dead winter for housing sales in Ontario, things picked up a bit over the past few months, but houses still aren't selling like they once were. I've heard some say we're in the midst of yet another real estate bubble and that soon this too will burst and prices will plummet again. What do you think?
294 replies
Deal Expert
Mar 23, 2009
16982 posts
3846 upvotes
Toronto
Not sure.

It also depends on the region in Ontario too. Personally, I'm guessing that we may see mild price drops in Toronto in the next year or so, but not a big crash. Then again, I've been guessing that for years. ;)
Jr. Member
Jun 26, 2009
134 posts
23 upvotes
Calling it a bubble might be too strong, but prices in the GTA will definitely fall. It's simple math: when interest rates go up, house prices will come down.
Deal Fanatic
Jul 1, 2007
8202 posts
1102 upvotes
Strange... interest rates went up from 2004 to 2007 yet real estate prices soared during that time period.

I think prices will be less volatile going forward though. People won't be as stupid as they were in the past; at least not for the next decade or so. Then they'll be stupid again.
Deal Addict
User avatar
Jul 31, 2007
1984 posts
144 upvotes
Real estate bubble? no I don't think so
Deal Fanatic
User avatar
Jun 26, 2005
9502 posts
1547 upvotes
Toronto
Bubble already? Aren't we just slowly crawling out of a recession in housing? My real estate friend is telling me things are getting back to normal, condos are getting back up there now in demand. Maybe because so many ppl have lost jobs, they are looking to condos instead of spending big money on houses?

Depends on the area as well. So that's a no for me, no bubble, not yet.
Deal Addict
User avatar
Nov 2, 2007
1288 posts
263 upvotes
GVRD
Depdends where you are but in Vancouver and its sourounding areas YES.

The problem here was that the existing bubble never fully deflated...the RE markets takes much longer to adjust. I think in 3-4 years people will see. But who knows???
Sr. Member
Jun 13, 2008
771 posts
95 upvotes
Thalo wrote:
Aug 24th, 2009 10:44 am
Strange... interest rates went up from 2004 to 2007 yet real estate prices soared during that time period.

I think prices will be less volatile going forward though. People won't be as stupid as they were in the past; at least not for the next decade or so. Then they'll be stupid again.
Pitz (I think?) said something like most of the mortgage and renewals were based on 35 years and the average downpayment was less than 10%.
Banned
Jun 19, 2006
9349 posts
53 upvotes
Most of what you're seeing on the news, about house prices being stable, is a load of BS. In reality, the price between a seller, who needs to unload in a reasonable amount of time (ie: let's say 2 months), and a buyer, who is properly capitalized (ie: has the standard 25% downpayment) have collapsed.

a) Apparently, the average 'downpayment', across all buyers of houses, including existing homeowners, is ~6%. Which means that actual, new buyers, have, in almost all instances, 0% down. A market hardly can be priced off of kids, with no capital whatsoever, buying a lottery ticket on their financial future.

b) Civil servants, and others, are arranging for transfers to low-cost areas, to lock in certain employer incentives concerning house prices. Basically, they're dumping their overpriced houses onto their employers, and walking away with the profit, while their employer is left to buy the house. This is popular in the RCMP apparently.

c) People, for whatever reasons, are often trading overpriced houses amongst themselves, so there isn't new and sustainable demand generated. Someone in Calgary is swapping their $500k house, for a $500k house in Edmonton, and vice versa. There are large incentives to do deals such as these because if the $500k house is a rental, capital losses can be claimed in the future.

d) Because of all of the above, and based on a transaction volume that has precipitously collapsed, along with some general 'massaging' of the numbers, the media has made the Canadian market look a little better than it really is. But rest assured, fundamentally, things are no different in Canada in the housing market than they are in the USA. Vancouver will experience just as much, if not worse of a crash than San Francisco. Windsor prices will converge with those of Detroit. There's no excuse for Calgary being 3X higher than Houston or Dallas.
"I worked with several H1B employees that were/are borderline ********. One of them wanted to spray an electrical patch panel with solvent to see if it would make the “network go faster”". <--- lol (source)
Sr. Member
User avatar
Feb 6, 2008
664 posts
19 upvotes
pitz wrote:
Aug 24th, 2009 11:10 am
a) Apparently, the average 'downpayment', across all buyers of houses, including existing homeowners, is ~6%. Which means that actual, new buyers, have, in almost all instances, 0% down.
Just wondering where you are getting this info.
Member
User avatar
Aug 17, 2009
240 posts
5 upvotes
Thalo wrote:
Aug 24th, 2009 10:44 am
Strange... interest rates went up from 2004 to 2007 yet real estate prices soared during that time period.

I think prices will be less volatile going forward though. People won't be as stupid as they were in the past; at least not for the next decade or so. Then they'll be stupid again.
+1 - I keep hearing that interest rates will go up and house prices will fall - Has to be a new equation as it was certainly not effective in the year before last when the interest rates were rising along with the sky rocketing house and condo prices.
Jr. Member
Aug 10, 2009
158 posts
Does anybody have any thoughts on the real estate market in Ottawa? It's pretty stable in general, no?
Sr. Member
User avatar
Feb 6, 2008
664 posts
19 upvotes
I like how people just make blind predictions just like with picking stocks.

Real estate market still follows supply and demand. The recent increase in resale home prices and volume don't show you the whole picture. If you look at the housing starts numbers, they haven't really improved. If you look at rent market, prices haven't gone down and vacancy hasn't gone up(at least for Toronto). People always need a place to live and supply is limited.

You should do your homework first and at least look at some credible publications from investment banks first. There are indicators that you can use to predict bubbles and crashes. In the least, you should look at affordability, population demographics, household debt, delinquency, home owner's equity, rental market, and other general economic indicators. The problem is that the data isn't readily available to the public and there aren't a lot of free resources like in the US.

You can start here
http://www.cmhc-schl.gc.ca/en/hoficlinc ... /index.cfm
http://www.statcan.gc.ca/start-debut-eng.html
https://www.rbccm.com/economics/cid-203755.html
http://research.cibcwm.com/res/index.html
http://www.td.com/economics/
http://www.bmonesbittburns.com/economics/
http://scotiabank.com/cda/content/0,160 ... en,00.html
Deal Fanatic
User avatar
Oct 23, 2003
7690 posts
1334 upvotes
prices on houses are keeping the same or going up...yet people are losing jobs or working for less money...you can all the charts you want and the investors you can find...a 5th grader can do the math if there's no buying power then there's no buying. people havent hit the wall that hard in canada as of yet and we might not, but theres no way housing can go up like this with salary slashes and less jobs.

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