Real Estate

If enough people are talking about a RE crash will it happen?

  • Last Updated:
  • Jun 14th, 2016 11:42 am
Tags:
None
[OP]
Deal Addict
Jul 6, 2005
3936 posts
1342 upvotes
Toronto

If enough people are talking about a RE crash will it happen?

It seems like, the last few days in particular, there has been more talk than usual in the media about a pending real estate crash.

From the big 5 banks throwing out warnings, Poloz preaching his doom and gloom, and now bank CEOs and COOs putting their personal homes up for sale.

For the past 8 or so years nothing has had an effect to pop this bubble... Im wondering if its one of those things that if enough people talk about it and believe it....it will eventually happen.

(I'm a homeowner BTW, not a renter waiting on the sideline hoping for a crash)
61 replies
Deal Expert
Aug 2, 2004
33736 posts
7372 upvotes
East Gwillimbury
Depends, a self fulfilling prophecy only occurs if the ones involved are preaching what they're saying

If this boom is caused by locals, then sure, the media can influence the boom. But if it is foreigners or locals with more dollars than sense, then it will continue to rise because the demand is just going to increase
Deal Addict
Feb 14, 2016
1754 posts
1176 upvotes
crashing as in terms of slowing down the price increase, possible
housing price going down significantly and people ditching their homes like detroit , will never happen

People are keep saying its bubble waiting to pop;
but my honest opinion, I think the price increase was within the reasonable range

Real RE bubble is more like Japan during 90s; (By 1991, commercial land prices rose 302.9% compared to 1985, while residential land and industrial land price jumped 180.5% and 162.0%, respectively, compared to 1985.[13] Nationwide, statistics showed that commercial land, residential land, and industrial land prices were up by 80.9%, 51.1%, and 51.7%, respectively.[13]) and it did pop; but housing price is Tokyo is still expensive

Toronto is not a city that solely rely on one company like detroit; I just don't see it failing like detroit did
Temp. Banned
Aug 7, 2011
6623 posts
991 upvotes
Vaughan
I keep talking about superheroes, and I don't see Superman anywhere.
Penalty Box
Apr 16, 2012
3565 posts
687 upvotes
Greely
Give me one situation in history where majority of people managed to predict a non binary event (exclude sporting events, election etc)
Deal Expert
User avatar
Jan 27, 2004
45458 posts
8463 upvotes
T.O. Lotto Captain
techcrium wrote: Give me one situation in history where majority of people managed to predict a non binary event (exclude sporting events, election etc)
No... But we base it probability.

When in history has any asset class increased in price rapidly forever, without any downturns?
Not many instances...

When in history has any asset class increased in price rapidly at unsustainable and unprecedented levels, and then just stayed flat... or continues to rise albiet at a lower rate?
Not many instances...

focus on yourselves.
Need a house to live in? Go buy it...
Want a condo pad dt? Go for it if its right for you...
No downpayment? Rent a modest apartment...
Newbie
Aug 13, 2015
29 posts
6 upvotes
Toronto, ON
Repooc wrote: It seems like, the last few days in particular, there has been more talk than usual in the media about a pending real estate crash.

From the big 5 banks throwing out warnings, Poloz preaching his doom and gloom, and now bank CEOs and COOs putting their personal homes up for sale.

For the past 8 or so years nothing has had an effect to pop this bubble... Im wondering if its one of those things that if enough people talk about it and believe it....it will eventually happen.

(I'm a homeowner BTW, not a renter waiting on the sideline hoping for a crash)


What kind of homeowner are you to be hoping for a crash ?

All homeowners want price to go up.
Banned
Aug 3, 2005
1235 posts
1166 upvotes
Of course! Didn't you know OP...The RE market is directly linked to RFD threads...
Deal Addict
Jul 9, 2004
1572 posts
171 upvotes
Delta
techcrium wrote: Give me one situation in history where majority of people managed to predict a non binary event (exclude sporting events, election etc)
My impression is that most people don't think there will be a crash, or the market wouldn't be this high. In the end though, it doesn't matter what people think or say. If there's a crash, the majority will only talk about it after the fact.
Deal Addict
User avatar
Mar 26, 2015
2573 posts
436 upvotes
BC
It's like this. You are watching someone balance plates, he's very skilful. He's adding more and more. Whoah he has 10 now on the go at once! Whoah this is spectacular. By now he has 100, now 1000.

OK everyone senses intuitively something is off. It can't be true. It can't be sustained. And yet the dude just added another 3.

Will talking about him dropping those plates mean he will? Who knows. He will or he won't - but everyone can see everything is off (except the crooked realtors and Christy Clark)
Go Raptors, Go!
Penalty Box
Apr 16, 2012
3565 posts
687 upvotes
Greely
UrbanPoet wrote: No... But we base it probability.

When in history has any asset class increased in price rapidly forever, without any downturns?
Not many instances...

When in history has any asset class increased in price rapidly at unsustainable and unprecedented levels, and then just stayed flat... or continues to rise albiet at a lower rate?
Not many instances...

focus on yourselves.
Need a house to live in? Go buy it...
Want a condo pad dt? Go for it if its right for you...
No downpayment? Rent a modest apartment...
Define concisely "unsustainable."

Why is it unsustainable?


Why is 160% debt to income unsustainable? People like you are arbitrarily pulling a number out off their ass.

Amazon in 2011 had like 5000 pe ratio. Is that unsustainable??

Are you going to sit here on the sidelines going to hope Amazon crashes to 2011 prices? You are probably going to be waiting awhile
Member
Jul 4, 2013
215 posts
189 upvotes
Toronto, ON
techcrium wrote: Define concisely "unsustainable."

Why is it unsustainable?
All five major banks, the CMHC, and a slew of economic experts and analysts have said it is unsustainable. I'm sure if you read their reports it will explain why they think so.
Deal Addict
Dec 6, 2006
2407 posts
791 upvotes
Some people have been waiting 10 yrs for the crash and I bet they wish they would have bought years ago LOL
Temp. Banned
Aug 7, 2011
6623 posts
991 upvotes
Vaughan
webworm wrote: Some people have been waiting 10 yrs for the crash and I bet they wish they would have bought years ago LOL
Lots of people in these threads that have been waiting for years.

It's a bit sad.
Deal Fanatic
User avatar
Nov 2, 2013
5533 posts
1417 upvotes
Edmonton, AB
If enough Rfd people pray to the mom's basement God to make interest rates rise to infinity so everyone loses their house to them and they get rich during the market bounce back. Then just maybe.
Consultant, Operator/Trucker
  • Oilfield & Industrial Services, Road Construction
  • Tax & Finance
  • In the Western Canadian Oilfield since 2013
Deal Addict
Dec 12, 2009
4682 posts
2301 upvotes
Toronto
JBeverley wrote: What kind of homeowner are you to be hoping for a crash ?

All homeowners want price to go up.
Might be one that has a home paid for or almost paid for. A lower MPAC assessment for property taxes would be nice. If one is not planning on moving for say 10 years ... what goes down will eventually come back up. In Ontario, decreases in market value assessments are immediate, increases are phased in over a 4 year period.

Might be one that is considering it is time to upgrade. Percentage wise a correction on a lower valued home is not the same correction on a higher valued home when it comes to actual dollars. Say I have a home that is worth $500,000 and I want one that is worth $1,000,000 the cost to upgrade is $500,000. If the market drops 10% My house is now worth $450,000 and the house I want is $900,000. The cost to upgrade then becomes $450,000. Not only is one saving on R/E commissions, the potential to have the new property value increase over time then becomes much more realistic.
Penalty Box
User avatar
Feb 21, 2013
344 posts
41 upvotes
Yukon
GTA is running out of land. You really can't build any more houses in the GVA. There just simply is no more land in GTA anymore. so supply squeeze, prices go up. economics 101.
Deal Addict
Jan 2, 2015
1602 posts
603 upvotes
Toronto, ON
techcrium wrote: Define concisely "unsustainable."

Why is it unsustainable?
Of all the statistics that demonstrate how unglued Vancouver’s house prices have become from reality, the most telling is one concocted by Vancouver mathematician Jens von Bergmann. In a recent blog post, he noted the city’s workers, from baristas to doctors, collectively pulled down about $18 billion last year in income. By contrast, he estimates, owners of single-family homes collectively “earned” about $25 billion in 2015 simply by “twiddling their thumbs” and watching the value of their drywall soar.
Link to blog: http://doodles.mountainmath.ca/blog/201 ... ng-thumbs/

The quote was from Maclean's, and if you look at the blog the $18 billion figure does not just include employment, but also investments, child tax payments, etc.

The gap would just become worse over time. Of course, much of that money is from well-educated people from outside the city (generally from within Canada) who have just gotten a new, high-paying job in the city and immediately buy an expensive house. I'm not entirely sure how they afford the down payments. Perhaps they rent out part of the house? For such reasons the market still hasn't collapsed. There's still enough demand to keep things rising. For now.
Why is 160% debt to income unsustainable? People like you are arbitrarily pulling a number out off their ass.
If that gap exceeds 350% (that's the range where people are considered "highly indebted"), many people begin failing to pay off their mortgages. Even so, most Canadians in that position will heroically hang on for at least a few months, cashing out their RRSPs, selling stuff and canceling services in an effort to avoid a foreclosure. Motivations do matter.

Of course most people aren't that indebted. Unfortunately, some are. If only 5% of people were that indebted and failed to pay off their mortgages, that would still be a lot of foreclosed homes, causing localized drops in property values. Depending on who you believe, it takes 4-8% of homes foreclosing to create a crash.

There's a fear that rising interest rates could force foreclosures. There's various surveys suggesting most Canadian households couldn't meet an emergency of $400 or $1000, etc. The surveys have flaws, of course. Did they only interview homeowners? Homeowners tend to have more wealth than renters, so could more easily withstand an emergency. Furthermore most people waste some money, and would waste less if their mortgage rates rose. Still, the point stands. Interest rates won't be low forever, and there's a fairly large amount of house rich/cash poor people who will have trouble making the transition. Those who can't get foreclosed on, and then property values can drop.

Top