Real Estate

Why are few on RFD in the middle when it comes to RE?

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  • Jun 27th, 2016 10:25 am
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Sep 8, 2007
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Way Out of GTA

Why are few on RFD in the middle when it comes to RE?

Typical RE bull
- owns a house, maybe an investment property in GTA
- sees RE as can't lose ever bet, with zero possibility of correction
- sees little of RE's upward move to do with easy money, it's all demand driven whether easy or tight monetary policy
- looks down on renters as bottom feeders that were stupid not to buy, feels they are investment genius for simply buying a house and should be profiled in business magazines
- uses past performance as an indicator of future performance

Typical RE Bear
- crash is imminent tomorrow, look prices are going down somewhere (even if they aren't)
- because they can't buy want they want,where they want for the price they want the government should step in so they can buy (because they deserve it)
- usually want in GTA or GVR
-usually struggles to understand RE prices are the result of global easy money. But put the blame squarely on Chinese buyers. But domestic buyers are also accessing the same easy money via loose credit and low rates.

Why are the bulls and bears so dogmatic? In a middle ground scenario you might get a homeowner that while not wanting a crash, acknowledges that things are getting out of whack given the low rates, easy credit, domestic and foreign buyers, and demand increase via immigration. Also sees a house as a principle residence not an investment portfolio that you can buy and sell like stocks. If you sell your house high, likely you will have to buy high.
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We definitely needed another thread about this.
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I'm sure the vast majority of people are in the middle-ground, they just have better things to do with their lives than argue with the fanatics - it's impossible to change their decisions anyway.

Myself personally, while I do think real estate prices are high, I highly doubt we'll see some sort of massive correction. Worst case a bit of a leveling-off for a few years. With the GTA expected to add 3+ million people over the next 25 years, all of those people will have to go somewhere...
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Jan 30, 2015
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gei wrote: I'm sure the vast majority of people are in the middle-ground, they just have better things to do with their lives than argue with the fanatics - it's impossible to change their decisions anyway.
Never a truer word said. I'm lucky enough to be on the RE estate train because of sacrifices and smart decisions. It was a personal choice to buy rather than rent and it was the decision that was right for my family and circumstances. Those who rent, made their own decisions that were right for them. it's not a right vs wrong argument. I'm in it for the long haul, I care what my house is worth when i sell it in 20 years, not what it will be worth in 20 weeks.
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Aug 10, 2015
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gei wrote: I'm sure the vast majority of people are in the middle-ground, they just have better things to do with their lives than argue with the fanatics - it's impossible to change their decisions anyway.
I agree.
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May 6, 2015
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squadz wrote: We definitely needed another thread about this.

LOL - you are so funny dude. Your one liners are awesome. I think most of us are in the middle. We own a property and know that the prices aren't going to infinitely increase. That being said, I have never dogged on anyone who doesn't own a house currently. It's a little annoying seeing some people argue about semantics and factors that they cannot control themselves. Rather than doing this they can make a "smart" decision according to their situation.

When you can't beat them, join em right?
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Mar 31, 2008
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gei wrote: I'm sure the vast majority of people are in the middle-ground, they just have better things to do with their lives than argue with the fanatics - it's impossible to change their decisions anyway.

Myself personally, while I do think real estate prices are high, I highly doubt we'll see some sort of massive correction. Worst case a bit of a leveling-off for a few years. With the GTA expected to add 3+ million people over the next 25 years, all of those people will have to go somewhere...
This. Great points. And this may finally spur people, businesses, or immigrants to move away from the GTA. A more balanced country.
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Rfd'er in mom's basement logic. Interest rates will rise to infinity, everyone loses their homes, buy on the drop and get rich when the market bounces back.
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Dec 15, 2009
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I am in the middle.

I own. That is my choice. I don't care about a crash or an increase - the house is where I live. It has some value. Yay.

If you rent, so be it. You have your reasons. If you own, so be it. You have your reasons.

Said reasons? I couldn't care less.

I own because I need a place to live and a place where my family can grow. If it made sense for us to rent I would consider it.
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Jun 4, 2016
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gei wrote: I'm sure the vast majority of people are in the middle-ground, they just have better things to do with their lives than argue with the fanatics - it's impossible to change their decisions anyway.

Myself personally, while I do think real estate prices are high, I highly doubt we'll see some sort of massive correction. Worst case a bit of a leveling-off for a few years. With the GTA expected to add 3+ million people over the next 25 years, all of those people will have to go somewhere...
Really? You think Markham, Richmond Hill, Vaughn, Newmarket, Aurora, or Oshawa houses/townhouses/condos can't plunge 25% simply based on overbuilding of the wrong type of condo as well as investor speculation? Think again. Look around you to see just how many condos are going up.
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Jun 4, 2016
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Lacklustre wrote: Never a truer word said. I'm lucky enough to be on the RE estate train because of sacrifices and smart decisions. It was a personal choice to buy rather than rent and it was the decision that was right for my family and circumstances. Those who rent, made their own decisions that were right for them. it's not a right vs wrong argument. I'm in it for the long haul, I care what my house is worth when i sell it in 20 years, not what it will be worth in 20 weeks.
My goal is not anything in particular. I don't have a "dream" of home ownership. But if there comes a time when prices are below what they would rent 20 years for, I will buy a home to live in, and live in it until the day I die. Otherwise, I will rent until the day I die.
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FirstGear wrote: Rfd'er in mom's basement logic. Interest rates will rise to infinity, everyone loses their homes, buy on the drop and get rich when the market bounces back.
Man, if I had a nickle for every time I heard the market was going to crash...
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Because the middle doesn't elicit any strong rebuke or reaction?

I'm in the middle. Prices will taper, there will be no crash, even with a correction and higher interest rates (if at all), we will not be revisiting 1998-2000 lows.

Unless there is a depression, r/e will always hit higher highs and higher lows.

With hyperinflation which we don't have, it's probably the best store of value.
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riffr aff wrote: I am in the middle.

I own. That is my choice. I don't care about a crash or an increase - the house is where I live. It has some value. Yay.

If you rent, so be it. You have your reasons. If you own, so be it. You have your reasons.

Said reasons? I couldn't care less.

I own because I need a place to live and a place where my family can grow. If it made sense for us to rent I would consider it.
If real estate crashes, then at least I know our mortgage rates aren't going up anytime soon. Win-win (prospective buyers, current home owners with mortgages).
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Jun 11, 2005
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tempre2016 wrote: Really? You think Markham, Richmond Hill, Vaughn, Newmarket, Aurora, or Oshawa houses/townhouses/condos can't plunge 25% simply based on overbuilding of the wrong type of condo as well as investor speculation? Think again. Look around you to see just how many condos are going up.
I am a neutral and I own. I am looking to buy more but am cautious about the price movement in the past 12 months in the two main cities.

The real estate market is never as "simple" as you make it out to be. Even if there is condo overbuilding (for the wrong type, whatever that means in your head), it is not clear how the detached market would be affected. Sure, it is plausible that this factor can lead to a decline, but there are other factors that also plausibly compensate for this and more.
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Jun 4, 2016
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mudd_stuffin wrote: I am a neutral and I own. I am looking to buy more but am cautious about the price movement in the past 12 months in the two main cities.

The real estate market is never as "simple" as you make it out to be. Even if there is condo overbuilding (for the wrong type, whatever that means in your head), it is not clear how the detached market would be affected. Sure, it is plausible that this factor can lead to a decline, but there are other factors that also plausibly compensate for this and more.
I don't care about the detached market though, that's not the type I want. Mowing a big lawn when it's 30C or shoveling snow when it's -10C? Forget it. I just want something over 1 000 square feet with ONE garage (we have only 1 car for a family of 4 because only one person is capable of driving).

The reality is that even this type of home has a price far above what it would rent for 20 years net of all expenses. So, why buy now? Since these homes are not what the majority would want, a downturn should make them significantly cheaper than the average--that would drive down property taxes on these things relative to detached homes, right?
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tempre2016 wrote: I don't care about the detached market though, that's not the type I want. Mowing a big lawn when it's 30C or shoveling snow when it's -10C? Forget it. I just want something over 1 000 square feet with ONE garage (we have only 1 car for a family of 4 because only one person is capable of driving).

The reality is that even this type of home has a price far above what it would rent for 20 years net of all expenses. So, why buy now? Since these homes are not what the majority would want, a downturn should make them significantly cheaper than the average--that would drive down property taxes on these things relative to detached homes, right?
I am questioning you since you said in the prior post houses/TH/condos can all plunge 25%. You cared enough about detached to mention it, and I was merely quoting you.

You have your bearish views on R/E, and that is fine. Let me just say that someone that has this much conviction about price movement without having regard to the other side of the equation is wrong almost all the time, and the same someone usually capitulates at exactly the turning point of a market, whether it is stock or real estate. To me, someone who sees only downside risk (but no upside risk) and vice versa is ill-informed.
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mudd_stuffin wrote: I am questioning you since you said in the prior post houses/TH/condos can all plunge 25%. You cared enough about detached to mention it, and I was merely quoting you.

You have your bearish views on R/E, and that is fine. Let me just say that someone that has this much conviction about price movement without having regard to the other side of the equation is wrong almost all the time, and the same someone usually capitulates at exactly the turning point of a market, whether it is stock or real estate. To me, someone who sees only downside risk (but no upside risk) and vice versa is ill-informed.
+1
A 25% plunge would bring many detached homes (perhaps also semi's) back to 2008-2010 pricing. Not going to happen unless interest rates shoot up, or major jobs losses mount.

A correction is possible but not sure when it's going to happen.
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I own. I think renting in this market makes a whole lot of sense though, particularly for people who are just starting out, have 'usual' incomes or who, like when we bought, didn't want to have a monster size mortgage hanging over their heads. I bought a house because I wanted a place to live, and at the time, we could afford to do so. We bought a small cheap house at the time in pretty much the only location we could afford in the city at the time and we have stayed there. I don't need a huge house, certainly don't want a huge mortgage and don't want the work that an investment property requires. To each their own. This works for us.
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mudd_stuffin wrote: I am questioning you since you said in the prior post houses/TH/condos can all plunge 25%. You cared enough about detached to mention it, and I was merely quoting you.

You have your bearish views on R/E, and that is fine. Let me just say that someone that has this much conviction about price movement without having regard to the other side of the equation is wrong almost all the time, and the same someone usually capitulates at exactly the turning point of a market, whether it is stock or real estate. To me, someone who sees only downside risk (but no upside risk) and vice versa is ill-informed.
So, do you mean that new landlords of condos, townhouses and detached houses won't see large rental profits like they were used to for a very long time?

I will give you an example in a different country. My parents bought a rental property in China for ¥ (Chinese yuan) 94, 500 in 1992 and were able to rent it out for ¥1, 000/month for some time, there were times throughout the 1990s that rents went as high as ¥2 000/month. But in the 2000s, various things, such as newer (commercial) real estate developments, interest rates and technological advances reducing demand (think about how people could run their businesses in their own homes), rents never went up significantly once they went to ¥2 000/month. Knowing about this, I pressured my mother to sell the property--and she listed it for ¥880 000 (rent there was ¥2 150/month), a cash buyer made an offer and it was accepted. This property is sold as of June, 2016.

So, what does this example tell you? That is because I know that ¥2 150 * 12 / ¥880 000 = 2.93% cap rate, and at the time they bought it, the cap rate was 12.7% (¥1 000 * 12 / ¥94 500 = 12.7%).

I view Canadian RE exactly the same way. If $700 000 town houses in the suburbs continue to rent for $2 100/month (search on Google and you will see plenty of them) while I know that money itself (like the ¥880 000 that is the proceeds of the sale in China) could be used to generate higher yields in, say, common and preferred shares, or even REITs, what reason do I have to buy a home?

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