Real Estate

Did we just hit the peak of the Toronto RE bubble?

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  • Dec 14th, 2017 3:05 pm
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ahlaker wrote:
Dec 7th, 2017 10:51 am
One could've earned that kind of return investing in countless other assets. A quick check says Amazon, Facebook and Apple all qualify. Had I invested in any of the Canadian banks in early 2009 I would've made that kind of return too. Investors made that kind of return in 1 year investing in Teck (had they bought in early 2015). I said that "hindsight is 20/20". You've picked an asset class (GTA housing) that's performed well and then you compare that to the "stock market" -- that's not fair. IMO, you should compare "Canadian Housing" to the "Stock Market" and if you do that, you'll see that "housing" isn't the great investment that everyone says it is. That's fine though, generally housing is not supposed to be an investment, it's supposed to be shelter. Here's my bottom line: those who say renting is "flushing money down the drain" and "housing can only go up" and "real estate is the greatest investment ever" have tunnel vision and aren't looking at the big picture.
For those who see housing as an investment, the big leverage is being able to borrow mortgage at a low interest rate. Using money you don't have to make more money (in the case housing market goes up). Of course anyone can borrow from their LOC (but not that substantial amount as a mortgage).
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jdu0ng wrote:
Dec 7th, 2017 11:04 am
For those who see housing as an investment, the big leverage is being able to borrow mortgage at a low interest rate. Using money you don't have to make more money (in the case housing market goes up). Of course anyone can borrow from their LOC (but not that substantial amount as a mortgage).
That's exactly it, which is especially valuable for young people with a long horizon. Where else would I have been able to get 1 million dollars to invest at 2.5%? Plus have someone live in that investment and give me money to pay down the loan for me. After 25 years I get all the appreciation from the investment and someone else paid off the loan for me. All of this could be done with only $50k if you bought a place as a primary residence, then rented it out and bought another. Rinse and repeat.
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ahlaker wrote:
Dec 7th, 2017 10:51 am
One could've earned that kind of return investing in countless other assets. A quick check says Amazon, Facebook and Apple all qualify. Had I invested in any of the Canadian banks in early 2009 I would've made that kind of return too. Investors made that kind of return in 1 year investing in Teck (had they bought in early 2015). I said that "hindsight is 20/20". You've picked an asset class (GTA housing) that's performed well and then you compare that to the "stock market" -- that's not fair. IMO, you should compare "Canadian Housing" to the "Stock Market" and if you do that, you'll see that "housing" isn't the great investment that everyone says it is. That's fine though, generally housing is not supposed to be an investment, it's supposed to be shelter. Here's my bottom line: those who say renting is "flushing money down the drain" and "housing can only go up" and "real estate is the greatest investment ever" have tunnel vision and aren't looking at the big picture.
You know what's the biggest difference?

You can't live inside your stock.
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alanbrenton wrote:
Dec 6th, 2017 9:04 pm
Believe me. Income is the major determinant not interest rates unless we are talking going back to double digits then interest will play a bigger role.

It's common sense. Cut unnecessary expenditure before defaulting on a secured asset such as a house.

So far no signs that auto and restaurant sales are tanking.
This is the biggest indicator to me. When eating out and frivolous spending starts drying up you know people are starting to stretch it really thin.

However, a lot of people rather have their starbucks coffee and avoid cooking dinner in the evening before kicking extra payments into their RRSP or TFSA. To my the only reason a house purchase beats renting is because the human mentality that you'll never miss a payment on your mortgage to go shopping. Vs the only way renters come out ahead is if they are able to religiously paying the rental difference into their investments. Of which everyone I know renting does not do.

This being said your primary residence is never an investment, and should never be treated that way. People who are buying now (and before) on emotion or fear of being priced out, rates going up/down, other govt rules are idiots. If you need a place to live, and you have the money and can afford the payments now is the time to buy. Don't try to time it.
Last edited by Super_Chicken on Dec 7th, 2017 11:41 am, edited 1 time in total.
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CollegeGraduate wrote:
Dec 7th, 2017 10:29 am
There is a huge risk that my landlord will kick me out for a rate reset if I don't comply.
I will then be forced to rent at $1800/month. In a way, I am just an outlier because a lot of people got a rate reset.
Did the Ontario government remove rent control?
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Super_Chicken wrote:
Dec 7th, 2017 11:41 am
This is the biggest indicator to me. When this starts drying up you know people are starting to stretch it really thin. A lot of people rather have their starbucks coffee and avoid cooking dinner in the evening before kicking extra payments into their RRSP or TFSA.
To my the only reason a house purchase trumps rent is the human mentality that you'll never miss a payment on your mortgage to go shopping. Vs the only way renters come out ahead is if they are able to religiously sock away the difference into investments.

This being said your primary residence is never an investment, and should never be treated that way. People who are buying now (and before) on emotion or fear of being priced out, rates going up/down, other govt rules are idiots. If you need a place to live, and you have the money and can afford the payments now is the time to buy. Don't try to time it.
I am amazed how bears have not raised the topic of leading indicators that will portend a housing crash. I would think auto sales would be the best indicator because it's the second biggest investment after property. Job losses we can tell from reading news media.

I'm not even piss poor (no six digits - 2010 RFD standards) but I tend not to eat out unless members of the household are craving to dine out. Paid two hundred plus to Ivan of iGarage for brake pad/rotor replacements, ATE 2000 brake fluid, and fluid flush. I have the brake tools (never used them before) but don't have the time so was pushed to pay for professional service. Had I eaten out say 15 times, instead of packing lunch, I would have spent around the same amount for better food flavor, ingesting more MSG and salt and my car would still shimmy when braking at higher speed.

Discovered the joys of pressure cooking as my wife is currently away, and it's not even an instapot but a decent cooker my aunt gave me years ago. I haven't really cooked a meal ever since but I can live with oatmeal, cereal, and other stuff.

It's not being stingy, it's just learning to prioritize and channel resources to the best use of funds.
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alanbrenton wrote:
Dec 7th, 2017 11:43 am
Did the Ontario government remove rent control?
If the landlord asks for $1,800, and I replied no. Then they will take the house back and say they will live in their themselves.
After I moved out, someone else will come to occupy this space. I won't know because they won't be posting "For Rent" signs anywhere.
It's one of those Chinese things. A lot of the operations are under the ground and/or table.

Luckily, my landlord is a good couple with a family. And they prefer stability rather than making huge money. Since I am a proven good tenant, they have nothing to fear.
We even got together for dinner occasionally. I treat their house with care. They are amazed at how clean the place is. I just stuffed a lot of things into the closest lol.
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CollegeGraduate wrote:
Dec 7th, 2017 11:54 am
If the landlord asks for $1,800, and I replied no. Then they will take the house back and say they will live in their themselves.
After I moved out, someone else will come to occupy this space. I won't know because they won't be posting "For Rent" signs anywhere.
It's one of those Chinese things. A lot of the operations are under the ground and/or table.

Luckily, my landlord is a good couple with a family. And they prefer stability rather than making huge money. Since I am a proven good tenant, they have nothing to fear.
We even got together for dinner occasionally. I treat their house with care. They are amazed at how clean the place is. I just stuffed a lot of things into the closest lol.
In 2018, ontario capped rent increase to 1.8%. The landlord can only increase that much.
https://news.ontario.ca/mho/en/2017/06/ ... -2018.html

Alternatively, if the landlord does want to kick you out, yes they can take back for their own use and find a new tenant that will pay market $1800.
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alanbrenton wrote:
Dec 7th, 2017 11:52 am
I'm not even piss poor (no six digits - 2010 RFD standards) but I tend not to eat out unless members of the household are craving to dine out. Paid two hundred plus to Ivan of iGarage for brake pad/rotor replacements, ATE 2000 brake fluid, and fluid flush. I have the brake tools (never used them before) but don't have the time so was pushed to pay for professional service. Had I eaten out say 15 times, instead of packing lunch, I would have spent around the same amount for better food flavor, ingesting more MSG and salt and my car would still shimmy when braking at higher speed.

Discovered the joys of pressure cooking as my wife is currently away, and it's not even an instapot but a decent cooker my aunt gave me years ago. I haven't really cooked a meal ever since but I can live with oatmeal, cereal, and other stuff.

It's not being stingy, it's just learning to prioritize and channel resources to the best use of funds.
Auto sales are being buoyed heavily on credit and longer loan terms so I'm not sure that's a reliable indicator of anything anymore but I'll leave that to the experts. I'm not sure I would use the words "auto" and "investment" together either unless you're a lender.

You can't pressure cook your way to a downpayment when the market is appreciating YoY to the tune of 10-20% and the downpayment is the real barrier for most potential buyers. The whole avocado toast and buy less coffee thing is silly, people aren't spending that much on these things. If it was as simple as brown bagging your lunch most people would've done it already. When I was younger you could buy a house for a 2-3x income multiple and actually save up the downpayment in a reasonable time period. Not so much anymore.

Thankfully the market is showing some signs of sanity lately so hopefully that continues. I'm in this house until they cart me off to the old folks home so I don't mind if the market drops.
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Redmask wrote:
Dec 7th, 2017 12:32 pm
Auto sales are being buoyed heavily on credit and longer loan terms so I'm not sure that's a reliable indicator of anything anymore but I'll leave that to the experts. I'm not sure I would use the words "auto" and "investment" together either unless you're a lender.

You can't pressure cook your way to a downpayment when the market is appreciating YoY to the tune of 10-20% and the downpayment is the real barrier for most potential buyers. The whole avocado toast and buy less coffee thing is silly, people aren't spending that much on these things. If it was as simple as brown bagging your lunch most people would've done it already. When I was younger you could buy a house for a 2-3x income multiple and actually save up the downpayment in a reasonable time period. Not so much anymore.

Thankfully the market is showing some signs of sanity lately so hopefully that continues. I'm in this house until they cart me off to the old folks home so I don't mind if the market drops.
So what, auto loans still require monthly payouts, sometimes 30-50% of a typical mortgage payout.

Hey a dollar not spent is a dollar saved. Doesn't matter what you do to save or not to spend, all these things add up.

Just because 2-3x multiplier was the norm back then, it's not guarantee it will revert back to that in the future. Check out China, Hong Kong and other countries were immigrants are from.

If you own the house and don't provide power of attorney to your children, you are not going anywhere. Be careful how your write your will. ;)


I, too, don't mind if the market drops because I'm in a much better position to pick up investment properties but then, many similar households will too.
Last edited by alanbrenton on Dec 7th, 2017 12:38 pm, edited 2 times in total.
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ahlaker wrote:
Dec 7th, 2017 10:51 am
One could've earned that kind of return investing in countless other assets. A quick check says Amazon, Facebook and Apple all qualify. Had I invested in any of the Canadian banks in early 2009 I would've made that kind of return too. Investors made that kind of return in 1 year investing in Teck (had they bought in early 2015). I said that "hindsight is 20/20". You've picked an asset class (GTA housing) that's performed well and then you compare that to the "stock market" -- that's not fair. IMO, you should compare "Canadian Housing" to the "Stock Market" and if you do that, you'll see that "housing" isn't the great investment that everyone says it is. That's fine though, generally housing is not supposed to be an investment, it's supposed to be shelter. Here's my bottom line: those who say renting is "flushing money down the drain" and "housing can only go up" and "real estate is the greatest investment ever" have tunnel vision and aren't looking at the big picture.
I am not talking about housing in this post but you need to be corrected.

FTR, the "stock market" since 2009 has not performed the same as AAPL, AMZN and FB. Why don't you mention NFLX while you are at it? The SPX was at the infamous 666 level at the financial crisis bottom.

Also, you are BSing on Cdn banks. The 2009 bottom on BNS was $23+ and it is $82 now. That is not 463% return. Ditto re CIBC where the low in 2009 was around $36.50. It has barely tripled since then, for 200%+ return.

Most importantly, you cannot compare housing vs stock market unless you do it on a risk-adjusted basis. Even a return of 1000% does not look all that great if the outcomes were binary being 99.99% of $0 payoff and 0.01% of 1000% payoff.
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alanbrenton wrote:
Dec 7th, 2017 12:38 pm
So what, auto loans still require monthly payouts, sometimes 30-50% of a typical mortgage payout.

Hey a dollar not spent is a dollar saved. Doesn't matter what you do to save or not to spend, all these things add up.

Just because 2-3x multiplier was the norm back then, it's not guarantee it will revert back to that in the future. Check out China, Hong Kong and other countries were immigrants are from.
People spread the payments out for continually longer terms to help defray their monthlies but either way, I'm not sure auto sales are a good factor anymore. I think auto loan defaults are a better barometer rather than car sales itself.

Yes all things add up, that doesn't mean they add up to a downpayment in the GTA in a reasonable time period. What worked for us might not work for others anymore, the rules of the game have changed so to speak. I'm not sure how someone in that position today would receive that advice but I suspect "unhelpful and frankly a bit condescending" might be in there somewhere.

I didn't say they would revert back to those figures, be careful you're revealing your own mindset too easily :)
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Redmask wrote:
Dec 7th, 2017 12:50 pm
People spread the payments out for continually longer terms to help defray their monthlies but either way, I'm not sure auto sales are a good factor anymore. I think auto loan defaults are a better barometer rather than car sales itself.

Yes all things add up, that doesn't mean they add up to a downpayment in the GTA in a reasonable time period. What worked for us might not work for others anymore, the rules of the game have changed so to speak. I'm not sure how someone in that position today would receive that advice but I suspect "unhelpful and frankly a bit condescending" might be in there somewhere.

I didn't say they would revert back to those figures, be careful you're revealing your own mindset too easily :)
Did I say I was renting and scrimping to save for a down payment? Don't think you can read my mind, lol. I didn't say you thought it would revert to the mean. Don't put words in my mouth.

It's a no brainer with it not going back to 2-3x. Interests are at historic low. I never said r/e would never correct. One would have to be a numbskull to think it will revert back to that multiplier. Even household income have changed over those decades.
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alanbrenton wrote:
Dec 7th, 2017 12:51 pm
Did I say I was renting and scrimping to save for a down payment? Don't think you can read my mind, lol. I didn't say you thought it would revert to the mean. Don't put words in my mouth.
You were the one who tried to ascribe that argument to me and I never said they would revert to those figures. I have no idea how you got that from my post, re-read it. You are arguing with yourself. Here I will help you out:
When I was younger you could buy a house for a 2-3x income multiple and actually save up the downpayment in a reasonable time period. Not so much anymore.
That's what I said. I did not say "Things will revert to these figures". So stop trying to say I did.

The point is, things have changed. People might not be able to fix their own car and pressure cook their way into buying a house. They are working against obstacles we did not face.
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Redmask wrote:
Dec 7th, 2017 12:57 pm
You were the one who tried to ascribe that argument to me and I never said they would revert to those figures. I have no idea how you got that from my post, re-read it. You are arguing with yourself.

The point is, things have changed. People might not be able to fix their own car and pressure cook their way into buying a house. They are working against obstacles we did not face.
Don't quote me if you cannot provide an invaluable response. Thanks.

What a waste of time. Not going to respond back to your nonsensical comments. You can have the last word or words. Must be hell to live with a person like yourself wanting people to think you are the brightest. :(
Last edited by alanbrenton on Dec 7th, 2017 12:58 pm, edited 1 time in total.

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