Real Estate

[Merged] Real estate crash - yes, no, maybe?

Poll: Canadian Real Estate Crash

  • Total votes: 1772. You have voted on this poll.
Yes
 
727
41%
No
 
716
40%
Maybe
 
329
19%
Deal Expert
Mar 23, 2009
18725 posts
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Toronto
Ceryx wrote: In essence, Chinese tend to believe that house is guarateed return compared to stock/mutual fund.
Uh, no. I have never in my life had a Chinese person tell me that a home purchase has a guaranteed return. The only place I have ever heard something like that is on real estate threads such as this one. Maybe you've encountered a few that have said that, but don't try to convince us that just because the people you know are foolish in that regard, that they are any way representative.

Gotta love the overgeneralizations.
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Dec 10, 2008
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As long as Canada makes a full time job importing people, there will be no housing crash, at least in Toronto.

But keep hoping, though.
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Feb 15, 2008
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Ceryx wrote: The reason is that RE owners are more emotionally attached ot the property. The housing crash/correction will usually start with decrease in sales volume. Once the volume decreases to a degree where the properties sales aren't moving. That's when massive price reduction begins.
Yup, or you get some very strange personalities involved, who, for instance, believe that prices should never go down, and they simply refuse to move their asking price.

For instance, look at my comment on Garth Turners' blog today:
“Does the bank get the insurance $ from CMHC and the house to sell via power of sale?…If the house can not be sold at fair market value, is the homeowner still on the hook for the difference through bankruptcy/insolvency laws?…(double whammy?)”

It is impossible for a house to not sell at ‘fair market value’. A house that cannot sell at any price is worth precisely $0. In some instances, certain houses may be worth less than zero because of environmental or tax liabilities.

The very definition of 'fair market value', is what the house would sell for, if it is to be sold in a timely fashion.

However, lots of people, usually highly indebted, or entitled, confuse 'fair market value', with being 'fair', 'fairness' usually implying, in their deluded minds, that houses only go up, or that they should "get everything they put into it back, and then some".


The sales volume of US RE decreases starting the beginning of 2007. The price didn't decrease significantly until the end of the year.
It's usually too late to get out when the price starts to decrease.
A few people usually can, if they price aggressively and get rid of it right away. The people who get slaughtered are those who are in disbelief. For instance, when the stock market collapsed in 2008/2009, people who sold early, even at a loss to their purchase price, were able to repurchase at much lower levels. Those who suffered the most were those who sold at the bottom, and didn't realize there was an uptrend until the market had gone up 50%. Those are the guys you see ranting on the stock boards that there's another crash coming, even though, its been a year and a half of straight gains for the stock markets pretty much.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
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Jan 16, 2009
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vonster wrote: so how long have we been in a recession?
sales volume has definetely decreased, a lot, but I haven't seen house values go down at all, or anymore than 5% here...
if anything, houses stay on the market for way longer and owners pull their listings off the market

not sure about toronto

but probably after the 35 yr amortization is gone, and now you can only refinance up to 85% of your home values
something worse could be coming this way
Sales Volume was decreased back in 2008 but our wise government decides to flood the market with cheap credit.

However, the cheap credit period is coming to the end and we can start to see volume decreasing this year already.

The housing crash is usually nasty. Not only property owners might owe banks more debt than the value of their assets, but the whole economy will be bad as people will lose job and refuse to spend.
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Dec 10, 2008
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Mark77 wrote:

Those are the guys you see ranting on the stock boards that there's another crash coming, even though, its been a year and a half of straight gains for the stock markets pretty much.
Oh?
Ceryx wrote: Sales Volume was decreased back in 2008 but our wise government decides to flood the market with cheap credit.

However, the cheap credit period is coming to the end and we can start to see volume decreasing this year already.
Who says cheap credit is coming to an end? You do. I predict there will be at least a decade of cheap credit relative to real inflation.
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Mar 23, 2009
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Toronto
Mark77 wrote: A few people usually can, if they price aggressively and get rid of it right away. The people who get slaughtered are those who are in disbelief. For instance, when the stock market collapsed in 2008/2009, people who sold early, even at a loss to their purchase price, were able to repurchase at much lower levels. Those who suffered the most were those who sold at the bottom, and didn't realize there was an uptrend until the market had gone up 50%. Those are the guys you see ranting on the stock boards that there's another crash coming, even though, its been a year and a half of straight gains for the stock markets pretty much.
Heheh. That sounds very familiar. "Those are the guys you see ranting on the real estate boards..." etc. :lol:

P.S. In my case for the stock market, I just didn't sell or buy much. Just stayed in long. Rode the wave, as it were.
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Apr 22, 2005
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Ceryx wrote: A housing crash isn't like stock market crash which just loses in value in days or weeks.

The reason is that RE owners are more emotionally attached ot the properties. The housing crash/correction will usually start with decrease in sales volume. Once the volume decreases to a degree where the sales aren't moving, That's when massive price reduction begins.

The sales volume of US RE decreases starting the beginning of 2007. The price didn't decrease significantly until the end of the year.

It's usually too late to get out when the price starts to decrease.
That's why I'm so relieved I "got out" last week. Assuming the home inspection goes well today that is. =)
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Mar 23, 2009
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Bamelin wrote: That's why I'm so relieved I "got out" last week. Assuming the home inspection goes well today that is. =)
Where are you going to live?

You can always rent, but sometimes it's a lot nicer to own your own place, if you plan on staying in the area for a long time. If it's an investment property, that's a different story though.
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Nov 7, 2010
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Hamilton, Ontario
Ceryx wrote: Sales Volume was decreased back in 2008 but our wise government decides to flood the market with cheap credit.

However, the cheap credit period is coming to the end and we can start to see volume decreasing this year already.

The housing crash is usually nasty. Not only property owners might owe banks more debt than the value of their assets, but the whole economy will be bad as people will lose job and refuse to spend.

i guess in my field it's always good
people buying houses, they get an appraisal
people going bankrupt/power of sale, they get an appraisal
people die, they get an appraisal
people divorce, they get an appraisal
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Feb 15, 2008
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EugW wrote: Heheh. That sounds very familiar. "Those are the guys you see ranting on the real estate boards..." etc. :lol:

P.S. In my case for the stock market, I just didn't sell or buy much. Just stayed in long. Rode the wave, as it were.

Yeah well, you have to look at valuations and fundamentals as well. Housing with negative cashflow (and definitely no GAAP earnings if you did the accounting with all the items) in an environment of all-time lows in interest rates, or stocks trading at 15X earnings and plenty of cash on the balance sheet? Certainly, it should be pretty obvious which can/will grow, and which will sink.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
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Jan 16, 2009
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mrbeachman wrote: Oh?
Who says cheap credit is coming to an end? You do. I predict there will be at least a decade of cheap credit relative to real inflation.
I don't think high rate is coming back quickly and it's a relative terms.

You can already see Federal government drecrease the amortizatoin/increase downpayment and BoC rise interest rate next quarter.
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EugW wrote: Where are you going to live?

You can always rent, but sometimes it's a lot nicer to own your own place, if you plan on staying in the area for a long time. If it's an investment property, that's a different story though.

He is going to rent a condo downtown with swimmingpool and stuff.

Now, it seems to me if a lot of people are selling their shacks in Milton to come and live downtown, then it looks to me like a made a decision of the century by buying a shoebox in Toronto. This can certainly have no negative effect on downtown real estate.
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Nov 7, 2010
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though im anticipating a flood of new work from power of sales possibly from people getting rid of their homes when interest rates start to increase and they can't afford it at renewal time


then i hope to snatch my house
Deal Expert
Mar 23, 2009
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Mark77 wrote: Yeah well, you have to look at valuations and fundamentals as well. Housing with negative cashflow (and definitely no GAAP earnings if you did the accounting with all the items) in an environment of all-time lows in interest rates, or stocks trading at 15X earnings and plenty of cash on the balance sheet? Certainly, it should be pretty obvious which can/will grow, and which will sink.
So, you bought tons of real estate in the 90s or early 2000s and sold in 2011 then?
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Apr 22, 2005
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EugW wrote: Where are you going to live?

You can always rent, but sometimes it's a lot nicer to own your own place, if you plan on staying in the area for a long time. If it's an investment property, that's a different story though.
Wife and I are going to move back to downtown (Toronto) and rent a condo. The rent will be slightly cheaper than what the mortgage + Property Tax and Maintenance is on my current home in Milton ... but where we will really save is that I won't have to take the 407 to work every day ... between gas and tolls I'm looking at almost an extra grand a month that I'll save.
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EugW wrote: So, you bought tons of real estate in the 90s or early 2000s and sold in 2011 then?

That would've been a winning strategy. Nobody wanted real estate, or oil stocks, that were trading at, in many cases, 10% yields (or 10X earnings), when tech stocks were doubling every 6 months. The people who snatched those up when they were unfavourable, have obviously done quite well.

Today, almost nobody wants a short position in the dollar. Everyones' bank accounts are stuffed full of dollars. "Grandma" is convinced that the stock market will collapse again so she keeps her savings account and GICs full to the brim. The kids believe that real estate is the only way to preserve wealth. I would say, there's going to be huge money in shorting that in the coming years.

BTW, all of my money in the 90s went into tech, and as you can see, I'm a ruined man because of it.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
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Mar 23, 2009
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Well, I bought real estate in the 1990s. I bought tech a little while after the crash in the 2000s. I also sold a whole bunch of stock in 2006-2007, before the 2008 crash.

However, unlike some people here, I won't claim to be an oracle. It just worked out that way. In the 90s I wanted a home to own, so I bought then. I didn't have a lot of money to invest until after the crash in the 2000s, which is why I didn't buy more until then. I sold before the crash in 2008 partially because I felt uncomfortable with the stock market, but the main reason was actually because I just wanted to get a bigger house to live in.

IMO, those who try to time the market with extreme investment practices are just setting themselves up for big problems. That applies to both the stock market, and to real estate.

Bamelin wrote: Wife and I are going to move back to downtown (Toronto) and rent a condo. The rent will be slightly cheaper than what the mortgage + Property Tax and Maintenance is on my current home in Milton ... but where we will really save is that I won't have to take the 407 to work every day ... between gas and tolls I'm looking at almost an extra grand a month that I'll save.
Yeah, that commute would suck, and it's expensive. My main criteria for my current home:

1) Within 30 minutes commute of work (either TTC or driving), during rush hour.
2) Safe neighbourhood
3) Detached
4) Private driveway
5) Within 30 minutes commute of work (either TTC or driving), during rush hour.
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Jan 16, 2009
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EugW wrote: IMO, those who try to time the market with extreme investment practices are just setting themselves up for big problems. That applies to both the stock market, and to real estate.

I don't think anyone is able to time the market correctly every single time.

Even Buffet agrees that there is no point on doing that, the only thing is to buy assets with good price/earning ratios. You want to have an investment to generate a reasonable percentage of profits for the money you invested.

If you take a look of rental costs/property costs of real estate in Toronto, you will defintely have a clear mind why it's not a good time to enter into RE Market.

However, if you can enjoy yourself a lot in your own houses, you can defintely go ahead and buy it. It's like people buying bmw even though they know the assets is going to drop in value in the next 5 to 10 years.
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Mar 23, 2009
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Ceryx wrote: I don't think anyone is able to time the market correctly every single time.

Even Buffet agrees that there is no point on doing that, the only thing is to buy assets with good price/earning ratios. You want to have an investment to generate a reasonable percentage of profits for the money you invested.

If you take a look of rental costs/property costs of real estate in Toronto, you will defintely have a clear mind why it's not a good time to enter into RE Market.

However, if you can enjoy yourself a lot in your own houses, you can defintely go ahead and buy it. It's like people buying bmw even though they know the assets is going to drop in value in the next 5 to 10 years.
Yeah, I've been steering people away from real estate as an investment. However, I still think it's reasonable to buy a house as a primary dwelling. You have to live somewhere, and there are some non-monetary advantages to owning vs. renting.

I've never quite understood those who sell their primary homes to try to time the real estate market, unless there are some other significant mitigating factors (eg. bad commute, bad neighbours, etc.).
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Feb 1, 2010
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Ceryx wrote: If you take a look of rental costs/property costs of real estate in Toronto, you will defintely have a clear mind why it's not a good time to enter into RE Market.

Fair enough, and we are in agreement. However, I do not agree that the Canadian mortgage market is in imminent danger of crashing and sending Canada in to bankruptcy. I do not believe prices will decline 70% or more.

Do you?

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