Real Estate

Home Owners: How much % crash before you're upside down?

  • Last Updated:
  • Mar 20th, 2017 10:14 pm
Tags:
None

Poll: How much of a % drop before you're upside down on the value your paid?

  • Total votes: 109. You have voted on this poll.
5% Drop
 
5
5%
10% Drop
 
3
3%
20% Drop
 
14
13%
30% Drop
 
14
13%
40% Drop
 
14
13%
50% Drop
 
24
22%
60%+ Drop
 
20
18%
I bought my house for $100,000 in 2011 and is now appraised at $1M+, bring on the RE crash!
 
15
14%
[OP]
Deal Addict
Jul 6, 2005
2796 posts
462 upvotes
Toronto

Home Owners: How much % crash before you're upside down?

This poll is directed at current homeowners who have bought in the last 6 years (2011+)...,

Given that you have a rough idea of the current market value of your house as it stands today (Spring 2017), and assuming that it is currently higher than what you paid for it (disregard your cash downpayment for simplicity of this poll). How much would your local RE market need to crash/correct before your house is appraised LESS than what you paid for it (in the last 6 years)? In other words, how much of a dip in RE prices could you sustain before you start getting worried that if you had to sell, you would likely sell at a loss?

Could you sustain a 20% dip?.... a 50% dip?

Personally, I sold my starter home and bought a 4 bed/4 bath resale in September 2015; and given the run up of prices in my area since that time; it would take a "crash" of at least 22% before my valuation would be upside down. However, based on actual cash invested in my home (based on the equity gains/cash invested from my starter home sale), the market would need to crash by 42% before I'm upside down on my mortgage owed.
61 replies
Member
Dec 23, 2010
364 posts
47 upvotes
Ottawa
Simply put if I bought real-estate I would never sell at a loss no matter what. I'd rather keep the house and permanently use it as rental income than sell at a loss. Large dips will not happen because people would never sell their home at that price.
Deal Fanatic
Dec 11, 2008
6594 posts
310 upvotes
Based on what I paid and what it's worth now. I bought Nov 2014. To get back to that price the drop would have to be about 30% to get there.

If I am underwater, it will take a crash of 75% for me since I put about 51% downpayment and I have been paying down the mortgage.
Jr. Member
Dec 5, 2015
132 posts
41 upvotes
Thornhill, ON
Can I be upside down if I don't have a mortgage?

But I'll need it to crash 60℅ to be same price as purchase 3 yrs ago
[OP]
Deal Addict
Jul 6, 2005
2796 posts
462 upvotes
Toronto
Applesmack wrote:
Mar 9th, 2017 1:47 pm
Simply put if I bought real-estate I would never sell at a loss no matter what. I'd rather keep the house and permanently use it as rental income than sell at a loss. Large dips will not happen because people would never sell their home at that price.
Agreed. We bought our house with the intention of this being our "forever home", My wife and I have very stable jobs, and factored in rise of interest rates much higher than what we pay now to ensure we're comfortable with our mortgage payments no mater what storm may be on the horizon.

I'm with you, in that even if my house's value did dip below what I paid for it, I'm in it for the long haul... I wouldn't be forced out of fear to sell my house at that point in time, I can only hope that in 35ish years from now, if we do decided to sell (to downsize, etc) that the market would be at par or higher than it is now. However, I'm sure we'll see many dips and run ups over that course of time,
Newbie
Aug 20, 2016
32 posts
33 upvotes
It is always different this time.
It never is.
People are loaded up with debt.
Something will happen.
Once it does i will pickup my fourth house.
Then one person that loses their house can rent from me.
Jr. Member
Feb 13, 2017
115 posts
99 upvotes
Applesmack wrote:
Mar 9th, 2017 1:47 pm
Simply put if I bought real-estate I would never sell at a loss no matter what. I'd rather keep the house and permanently use it as rental income than sell at a loss. Large dips will not happen because people would never sell their home at that price.
so much this.

as long as I'm employed and can pay the mortgage, dont care what the value decrease it. Like housing history from the beginning of time, the trend curve tends to go up.
Deal Fanatic
Dec 11, 2008
6594 posts
310 upvotes
Agreed. We ain't moving as we planned to stay here forever. I mean land transfer tax alone in Toronto sucked so we made sure we were here for the long haul.

We currently spend 50% of our net income and save the rest so we should be pretty good in case something happens to one of us. 1 has a very stable job and the other is "highly" employable IMO. We both make the same income.
Member
Nov 7, 2012
296 posts
59 upvotes
TORONTO
I already feel upside down. We purchased our house last June for 500K. The previous owners bought it from blueprint for like $320K 7-8years ago.

Am I worried? A little... Only about what the interest rates will be in 4years when we renew. This is our first home and really expect to be here for a while. Though we do pay attention to what our home possibly costs now since we bought it, we've already assumed we will be here for the long haul. As time goes one we're looking to accelerate our mortgage. If we do plan on selling in the next 24 years obviously we would like to make something but it's not an issue.
[OP]
Deal Addict
Jul 6, 2005
2796 posts
462 upvotes
Toronto
An interesting (and somewhat expected) trend observed, based on the comments so far, is that people who bought several years ago, can weather a far greater "crash"/correction and still be ahead of the game.... Let's say a 20% to 30% crash.

Can someone comment on how much the market dropped during the late 80's/early 90's crash (I saw the chart posted a couple times the past few days)? For those that keep on with the rhetoric of "This time it's different, except its not".

So, in reality, if today's renters/sideliners are praying for a crash so that they can finally buy; they may actually be in for a rude awakening because they still have to compete with:
A) people that refuse to sell in a depressed market (thus limiting supply, with ever increasing demand)
B) richer locals and/or foreigners that will continue to buy additional homes in the depressed market for the purposes of renting out (investment)
C) bidding wars with other like-minded renter/sideliners who have been waiting for this moment
Deal Addict
User avatar
Dec 1, 2013
3442 posts
1076 upvotes
BC / GVA
Paid $390,000 in 2005 for a run-down house nobody wanted to buy. Current valuation is $1.5 million (I lucked out with the area, it has become popular with foreigners due to the close proximity to pretty good schools). Safe to say, I'm not worried Smiling Face With Open Mouth. I would take the profit and move to somewhere cheaper but my line of work is only available in big cities.
Last edited by dealseaker101 on Mar 9th, 2017 2:45 pm, edited 1 time in total.
¯\_(ツ)_/¯

¯\_(-.-)_/¯
Member
Jan 31, 2016
261 posts
42 upvotes
Toronto, ON
Bought almost two years ago to the day and a 30% drop would being us back to those numbers. Struggling a bit with the thought of selling and moving away from GTA to buy and be mortgage free. Or just be content.
Last edited by Ketchenany on Mar 9th, 2017 3:19 pm, edited 2 times in total.
Deal Addict
User avatar
Dec 27, 2009
2192 posts
609 upvotes
Ottawa, ON
Repooc wrote:
Mar 9th, 2017 2:41 pm
An interesting (and somewhat expected) trend observed, based on the comments so far, is that people who bought several years ago, can weather a far greater "crash"/correction and still be ahead of the game.... Let's say a 20% to 30% crash.

Can someone comment on how much the market dropped during the late 80's/early 90's crash (I saw the chart posted a couple times the past few days)? For those that keep on with the rhetoric of "This time it's different, except its not".

So, in reality, if today's renters/sideliners are praying for a crash so that they can finally buy; they may actually be in for a rude awakening because they still have to compete with:
A) people that refuse to sell in a depressed market (thus limiting supply, with ever increasing demand)
B) richer locals and/or foreigners that will continue to buy additional homes in the depressed market for the purposes of renting out (investment)
C) bidding wars with other like-minded renter/sideliners who have been waiting for this moment
There will always be people that HAVE to sell though. It doesn't have to be the entire market selling to get a crash going. Nobody ever actually HAS to buy, but there will be people who do have to sell. The people on RFD are not really a good representation of the general population anyways since there are a higher portion of financially savvy, fiscally responsible people who post here than there are in the general population. For the typical person who has bought (in inflated places like GTA, Vancouver, etc) in recent years a real estate downturn will hurt big time, and some will lose their shirts. Absolutely.

As for bidding wars - won't happen in a downward spiral. That is not how crowds behave. You might get some of that after an initial dip (what they call the dead cat bounce), but once it goes down you won't have people running prices up with bidding wars. Lots of people on the sidelines will be afraid of catching a falling knife. You won't see the bidding wars (like you currently see) anymore once things have truly turned.
Sr. Member
Jul 14, 2002
546 posts
44 upvotes
Repooc wrote:
Mar 9th, 2017 2:41 pm
An interesting (and somewhat expected) trend observed, based on the comments so far, is that people who bought several years ago, can weather a far greater "crash"/correction and still be ahead of the game.... Let's say a 20% to 30% crash.

Can someone comment on how much the market dropped during the late 80's/early 90's crash (I saw the chart posted a couple times the past few days)? For those that keep on with the rhetoric of "This time it's different, except its not".

So, in reality, if today's renters/sideliners are praying for a crash so that they can finally buy; they may actually be in for a rude awakening because they still have to compete with:
A) people that refuse to sell in a depressed market (thus limiting supply, with ever increasing demand)
B) richer locals and/or foreigners that will continue to buy additional homes in the depressed market for the purposes of renting out (investment)
C) bidding wars with other like-minded renter/sideliners who have been waiting for this moment
Might be easier to determine a crash based on the mortgage that the average person is carrying.
If someone is underwater, but their mortgage is paid, they have a lot of holding power.
Deal Fanatic
Dec 11, 2008
6594 posts
310 upvotes
Ketchenany wrote:
Mar 9th, 2017 3:19 pm
Bought almost two years ago to the day and a 55% drop would being us back to those numbers. Struggling a bit with the thought of selling and moving away from GTA to buy and be mortgage free. Or just be content.
Wow your home more than doubled in value? Nice
× < >
Rotate image Save Cancel

Top