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?

  • Total votes: 0. You have voted on this poll.
Jr. Member
Jun 26, 2009
134 posts
23 upvotes
VivienM wrote:
Aug 30th, 2009 12:44 am
I may move back to 416 in a little under a year, and while I'd rather go to the 905, the lengthy commute to downtown may make me live in 416 again. :(
What I'm hearing you say is that you want a downtown job without the commute. Also, you're willing to sacrifice your suburban lifestyle in order to keep it. Even though it drives you crazy.
VivienM wrote:
Aug 30th, 2009 12:44 am
That's the problem with Toronto. After decades of refusing to expand roads into downtown, they're actually succeeding at forcing otherwise suburban-minded people to live in tiny condos. :(
No, suburban-minded people move to the suburbs. They either get a job in the suburbs or put up with the commute. Many are quite happy.
VivienM wrote:
Aug 30th, 2009 12:44 am
And you clearly don't understand the shopping point. Try going to store A, then store B, then store C in a big-box-store-mall-type thing. If you have a car, you can put your purchases from A and B in your car, then have your hands free to go to C.
You clearly don't understand urban-minded people. Why would they be shopping at a big-box store in the first place?

Living in an urban environment is clearly not for you. Why put yourself through that misery? You would also save yourself a ton of money when you purchase a house. Instead, your festering hatred of Toronto, and your current situation, will continue to grow. Happiness awaits you in the suburbs.

Anyhow, let's get back to the original topic ...
Newbie
Jun 29, 2009
12 posts
Calgary
Looking at the poll, and many of the well written posts on this thread, it would seem to suggest that many believe housing has further to drop.

Real Estate is one of the few things in life that can almost be counted on to gain in value, for the simple reason that they're not making any more land.

Taking myself out of the current financial dilemma and looking at this from a broad sense, I believe that the best times to buy real estate are when there is a general negative feelling about it. At very few points in our lives will so many people have such ominous real estate predictions.

Some extremely good points are made by the real estate bears. However, the mere fact that there are more bears than bulls suggests a unique, historical buying opportunity, imho.

Whether the bottom was reached two months ago or four months from now, prices are cheaper than they've been in several years, and they will recover and surpass their previous highs, as they always do.
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User avatar
Jan 19, 2005
3757 posts
694 upvotes
jjgallow wrote:
Aug 30th, 2009 1:23 pm
Real Estate is one of the few things in life that can almost be counted on to gain in value, for the simple reason that they're not making any more land.
Inflation can be counted on going up as well. Explain why Japan's RE hasn't recovered in years. Surely, Japan doesn't have a lot of land. The logic to buy simply because "they're not making any more land" is a silly one. Would you buy a house at any price even if renting the same place is 50% cheaper? When short-term prices go up a lot faster than historic levels, the chance of them dropping before going up again is quite high. Why not wait for the drop to a sane level before buying?
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Newbie
Dec 10, 2006
6 posts
Japan's population is shrinking, whereas the Canadian population is still growing, that's the big difference. The supply of land is always fixed, but increase population means increase demand, hence price increase.
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Jun 19, 2006
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kaziim wrote:
Aug 30th, 2009 4:27 pm
Japan's population is shrinking, whereas the Canadian population is still growing, that's the big difference. The supply of land is always fixed, but increase population means increase demand, hence price increase.
Ummm, Japan fits 4X Canada's population into an area that's less than the size of Newfoundland.

And they're *still* experiencing falling prices.
"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)
Newbie
Dec 10, 2006
6 posts
In absolute terms, Japanese real estate is still much more expensive than Canada, but since their population is falling, their RE prices is doing the same.
Deal Addict
Jul 28, 2005
3237 posts
25 upvotes
kaziim wrote:
Aug 30th, 2009 5:42 pm
In absolute terms, Japanese real estate is still much more expensive than Canada, but since their population is falling, their RE prices is doing the same.
Depending on the source you use, Japan's population either has not yet begun to fall, or has just begun to fall in the past 2 or 3 years. And even if it has begun to fall, it's just an incredibly small decrease so far. This is not the main cause of Japan's real estate prices falling.
Newbie
Jun 29, 2009
12 posts
Calgary
recordman wrote:
Aug 30th, 2009 2:25 pm
Inflation can be counted on going up as well. Explain why Japan's RE hasn't recovered in years. Surely, Japan doesn't have a lot of land. The logic to buy simply because "they're not making any more land" is a silly one. Would you buy a house at any price even if renting the same place is 50% cheaper? When short-term prices go up a lot faster than historic levels, the chance of them dropping before going up again is quite high. Why not wait for the drop to a sane level before buying?
As commanded, I will explain why Japan's real estate prices haven't gone up in years.

They're a small Island with no natural resources that reached population saturation a long time ago. They've also watched their currency go up 300% in value relative to the West in over the last 30 years.

Your turn: Explain why practically every other country in the world has experience a steady increase in real estate prices for as long as it's been recorded.
Deal Fanatic
Aug 27, 2004
6501 posts
141 upvotes
Toronto, ON
jjgallow wrote:
Aug 30th, 2009 6:37 pm
Your turn: Explain why practically every other country in the world has experience a steady increase in real estate prices for as long as it's been recorded.
How about you explain why that "steady increase" went out of whack in about 2002?
Newbie
Jun 29, 2009
12 posts
Calgary
VivienM wrote:
Aug 30th, 2009 6:49 pm
How about you explain why that "steady increase" went out of whack in about 2002?
In which Country? Japan? US? Canada?

They all behaved differently.

Japan went down, the US went up as per previous years, and Canada had it's first solid year of gains in a decade.

http://www.globalpropertyguide.com/real ... e-prices/C

If you mean Canada, we are only 50% higher than we were 20 years ago. That's a 2% return per year, which is close to our inflation rate. If you consider 2002 to be a big boom year, you have to consider the previous 15 years being flat. It all sums up to a steady increase in the long run.
Deal Addict
Oct 1, 2006
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Montreal
jjgallow wrote:
Aug 30th, 2009 6:37 pm
Your turn: Explain why practically every other country in the world has experience a steady increase in real estate prices for as long as it's been recorded.
Source? This statement is incorrect. Real increases of real estate prices have mostly been close to 0%.

350 years of house prices in Amsterdam:
http://www.nrc.nl/multimedia/dynamic/00 ... 18089e.jpg

120 years of house prices in the USA
http://montyhigh.typepad.com/.a/6a00d83 ... 970c-800wi

60 years of house prices in Japan:
http://img171.imageshack.us/img171/4295 ... entgo8.jpg
Newbie
Jun 29, 2009
12 posts
Calgary
Germack wrote:
Aug 30th, 2009 7:20 pm
Source? This statement is incorrect. Real increases of real estate prices have mostly been close to 0%.
Maybe you missed it, but I just provided a link to every country's real estate prices in my last post.

In any case, you just provided three historical graphs of real estate prices Adjusted For Inflation, and prices were up in all of them but the City of Kyoto.

All this shows me is that house prices, at very least, will keep up with or outperform inflation. That means steady price increase,which was my point.

Stocks may sometimes (and sometime not) beat inflation, but they don't give you a place to live and they are not tax free (even RRSPs). There is simply no long-term way to leverage yourself into a stock,etc that will go up with inflation like you can with a real estate mortgage (leaps, etc already have inflation already baked into the price).

p.s...
Your US graph shows prices under inflation in 2010, the problem with that is I too could draw a graph with my own 2010 prices.
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Jun 19, 2006
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jjgallow wrote:
Aug 30th, 2009 7:38 pm
Stocks may sometimes (and sometime not) beat inflation, but they don't give you a place to live and they are not tax free (even RRSPs). There is simply no long-term way to leverage yourself into a stock,etc that will go up with inflation like you can with a real estate mortgage (leaps, etc already have inflation already baked into the price).
Ummm, and what exactly do you think happens to a typical Canadian's 5-year fixed mortgage, or ARM, when inflation does accelerate??

At least in the USA, at current prices, there's a pretty good 'business' case for taking a cheap 30-year mortgage right now, and locking in a certain price -- because the mortgage rate itself can't reset on you.

In Canada, because of the lack of true long-term mortgages, the inflation risk falls onto the borrower essentially. True, the bank may suffer in the short-term, but 1/5th of their portfolios get repriced every year, so the suffering is just momentary.

That's why Canadian banks are churning off record earnings right now, while the entire US system is insolvent.
"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)
Deal Fanatic
Aug 27, 2004
6501 posts
141 upvotes
Toronto, ON
jjgallow wrote:
Aug 30th, 2009 7:18 pm
In which Country? Japan? US? Canada?

They all behaved differently.

Japan went down, the US went up as per previous years, and Canada had it's first solid year of gains in a decade.

http://www.globalpropertyguide.com/real ... e-prices/C

If you mean Canada, we are only 50% higher than we were 20 years ago. That's a 2% return per year, which is close to our inflation rate. If you consider 2002 to be a big boom year, you have to consider the previous 15 years being flat. It all sums up to a steady increase in the long run.
I consider 2002 to be the start of the boom. Certainly in the U.S., less so here. But still...

Do you have a graph with 50-100 years of data? I think that would show my point much more clearly.

See, my theory is essentially this: the savings from low interest rates, 35 year amortizations, etc. are capitalized into house prices. (For those of you who are former economics majors, you'll no doubt remember the argument that farm subsidies only benefit the owner of the farm at the time the subsidy is introduced because the subsidies are capitalized into the land price. This is what I'm talking about.) As a result, while mortgage payments haven't hugely changed, the purchase price of houses has been going unusually high. I think the American experience supports this argument...
Newbie
Jun 29, 2009
12 posts
Calgary
pitz wrote:
Aug 30th, 2009 7:44 pm
Ummm, and what exactly do you think happens to a typical Canadian's 5-year fixed mortgage, or ARM, when inflation does accelerate??
Well, if we just print more money and keep interest rates low like the BOC is currently suggesting...then not much.

Having said that, salaries will also go up with inflation (typically), allowing people to afford the higher interest rate. You can have an extreme situation like in 1982 with 18% interest rates coming out of nowhere, but even then it was mostly people leveraged into way too many homes that got caught. The average homeowner lived to see the value of their house rise.

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