Baby, we got a bubble!?

[redfirm]

I know some of you miss me , as an investor, I am adding Florida real estate at this time.

CG, so you see more investment potential in Florida than here? I'd appreciate some detail, if you don't mind. I am on the verge of making a small purchase there as well.

 

[ducati0000]

Come on gloomers say this article is way off base like the other ones that mentioned GTA real estate market is still healthy and not going to drop %20 like some posters were harping about..

http://ca.finance.yahoo.com/news/Real-estate-buyers-focus-low-capress-322648189.html?x=0

 

[daveto]

Come on gloomers say this article is way off base like the other ones that mentioned GTA real estate market is still healthy and not going to drop %20 like some posters were harping about..

http://ca.finance.yahoo.com/news/Real-estate-buyers-focus-low-capress-322648189.html?x=0

Really? Did you read the article and think about what it says? Ok, let me try

1. Low interest rates are not sufficient to maintain real estate prices (Look to the US and other markets)
2. The quoted economists expect a 5-10% decrease over the next 18 months. In contrast, those of us who expect a 25% drop think it will happen over 5 years. (consider that the US has taken 5 years for its 25% drop). So where is the disconnect between 5-10% over 18 months, and 25% over 60 months?
3. For every article or estimate that prices will go in one direction, there is a different article or estimate predicting the opposite. Instead of reading the headline, think about the logic presented to support that headline.
4. Finally, these are not independent economists expressing their independent opinions. These are employees of banks and the CREA, and they are doing a job. Once again, think about it.

ps. When one is reduced to ridiculing an opposing view with name calling (gloomers, etc), it demonstrates an insecurity in one's own position. You will note that those who think prices will correct don't use pejorative names to describe those who think differently. Yet those who think prices will increase, consistently mock the "doom and gloomers". As it happens, I am one of the most optimistic cheerful people you would ever meet. But sadly I've been burdened with intelligence, and therefore I can't simply trot through life in a haze of blissful ignorance. Although I certainly wish I could.

 

[KA1]

http://blog.buzzbuzzhome.com/2011/08/is-canada-in-bubble-trouble-check-out.html

 

[CN Tower]

CG, so you see more investment potential in Florida than here? I'd appreciate some detail, if you don't mind. I am on the verge of making a small purchase there as well.

Red,

It's very hard to make money in real estate from afar unless you have extensive local market knowledge and contacts. Be very wary and if by chance you do buy something make sure it is right on the beach. Everything else just gets decimated in a downturn as see time and time again.

Condo George is a self-promoter and salesman (sorry George) so his mandate is to lure people to an area and pump it. I would proceed with extreme caution unless you intend on using your Florida real estate purchase for personal seasonal residency. If that is the case you can now enter the market at an attractive price relative to say 4 years ago. But expecting appreciation or even expecting to not feed a property down there is quite misguided.

 

[ducati0000]

Daveto did you read the article?...if interest rate stays stable with job and population growth gaining strength there be no major correction.With rental space at less than %1.8 where do you actually think the new arrivals will live?...

 

[KA1]

Red,

It's very hard to make money in real estate from afar unless you have extensive local market knowledge and contacts. /QUOTE]

If my memory serves me correct, in earlier posts on this thread, Red has stated that he is part of a 'market savy', tax knowledgable group who see bountiful 'opportunities' in US real estate.

Rather than giving cautions, I would wish them "Good Luck". Hopefully, one day while I am still around, Red will make a post thumbing my nose and telling me 'that I told you so'.

My best wishes to you Red and your coharts.

 

[daveto]

Daveto did you read the article?...if interest rate stays stable with job and population growth gaining strength there be no major correction.With rental space at less than %1.8 where do you actually think the new arrivals will live?...

Ducati,

Your post makes no sense.

First, you preface your comments with "if". And what follows after is just one "if" scenario. What about the other "if's"?

Second, you talk about if the "interest rate stays stable. What does that mean? Do you think that the current lowest mortgage rates in history will remain unchanged and will never increase? Similarly, we have seen in other markets that the current low interest rates are insufficient to maintain housing demand.

Third, you talk about job growth. I would agree with you that job and income growth would support increased consumption including housing. But salaries have increased by 10% in real terms over the past decade while real estate has increased by 100%. Further, job/income growth is far from certain. There is an increased likelihood of a double dip recession.

Fourth, you talk about population growth and rental vacancies. But we have had population growth in the past during periods of decreasing real estate prices. Have done any comparison of the pace of immigration/population growth now, as compared to 1991 or other times?

Finally, you didn't respond to any of the points that I made in my prior post.

 

[radioheadmike]

I don't understand the whole debate in regards to house prices in Canada. What is this ongoing debate going to get you in the end? What are we trying to achieve in debating if prices are going up or down?

The only posters I see that are trying to achieve something from these debates are the ones who are waiting on the sidelines. You are trying to convince yourself (by convincing others) that prices will fall so that you can buy "low" sell "high" etc etc....

And for posters using the U.S as an example of what will happen to Canada, I think you should consider looking at the average house prices in New York City , San Fran, Boston, and other Major Metropolis across the U.S. They are still super expensive, even more than GTA prices.

Prices in the U.S dropped in wastelands, the suburbs that were hours away from real Jobs that are actually valid in today's societies. A suburb depending on one manufacturing Company that makes gas guzzling cars will definitely not survive.


The only thing that would actually bring prices crashing, in a major city like Toronto, would be hyper inflation.

22% interest on a 78,000 dollar home is as expensive as today's prices (I think). So it will still be expensive to own a home

Also, if prices do crash , people will lose their homes and the economy will sink. So guess what? You will most likely lose your job and you will still not be able to afford that house on st.Clair and Yonge st, even if it was 50% cheaper.

 

[interested]

I have to agree with Daveto.

Dave is making what he believes are rational arguments to arrive at some conclusions and simply asking that apart from wishfully concluding prices will continue upwards, seeks that people view the facts and draw reasonable conclusions.

My personal belief is that the only thing that will keep prices increasing is the manipulation of the market by governments pumping in money and interest rates that are the lowest in history. An article today said 10 year treasuries are yielding 2% or less, the lowest in history. I emphasize that people are scared and flocking to safety of US Treasury bills. The main thing supporting increased prices in my view is these unrealistically persistent low interest rates due to an overall poor performance of the developed economies.

A lot of quite intelligent people fear that just like those who have maxed out their credit cards eventually cannot service their debt, eventually the response will have to be deleveraging. Along with that will inevitably be devaluations of multiple asset classes including real estate.

Again, I just can't understand with economies possibly on the verge of a double dip recession barely exiting the last recession and only doing so by governments spending massive amounts of money is not a recipe to explain an unfettered rise in prices for shelter.

If there is a correction, it may well be very painful, and worse; if inflation continues and the central banks have to fight it with raising interest rates; on top of a weak economy; the correction has the potential to be quite severe.

The constant ruminations of Carney and Flaherty is because they appreciate that should the housing market fall or interest rates have to rise, the effects in Canada could possibly be just as devastating as has occurred in the US and presently there is little justification for continued rising of prices and Canadians spending more money to purchase assets based on the lowest interest rates in 50+ years and having less left over for other purchases which they can only manage now due to the inordinately low rates.

 

[Condo George]

CG, so you see more investment potential in Florida than here? I'd appreciate some detail, if you don't mind. I am on the verge of making a small purchase there as well.

I purchased a condo last year in Dunedin, my first as a seasonal home. I paid the same price as the originally owner paid new back when it was built in 1980. Prices have come down 65% in 4 yrs, Florida will always have weather, with all the bad news now maybe a time to buy, Cdn $ etc....

As for accumulating........cap rates are 10 to 15% for rentals, now there is a reason for this, they have to be to get investors to purchase because we dont know how long the price depression will last in the US. 5 yrs? I dont think its another Japan scenerio but you have to consider if not a seasonal purchase, the upside may not be there for a long time, hence the rental flow return on investment being so high. Places like Windsor, Hamilton, Bradford run into the same where they have to offer a very high rate of return to get investors in.

Personally, I am buying Toronto but not buying everything that is for sale, I believe the market is in a period of lull in core condos at this time, I wrote about a guess on summer a while back, places like Festival and some others dt are experiencing lack luster demand on resales. I think this will pick up in the fall.

 

[Condo George]

I have been out of country for a while and just catching up on rate news and predictions, last year everyone was scared rates were going through the roof and prices would come down because of rates and supply in the latter part of 2010, now rates arent going up and in fact coming down. The majority of people listen to media, housing experts predictions, forecasts etc. They have all been wrong!

Sideliners have been watching since 2000 and then again in 2008, what a run to miss out on. With uncertainity in stocks, gold and real estate are viewed by most as safe haven inv.

 

[urbandreamer]

Over 60 launches coming this Fall in the GTA condo market+death cross on the stock indexes=1 bedrooms from $179,999 c.February 2012?

 

[CN Tower]

I purchased a condo last year in Dunedin, my first as a seasonal home. I paid the same price as the originally owner paid new back when it was built in 1980. Prices have come down 65% in 4 yrs, Florida will always have weather, with all the bad news now maybe a time to buy, Cdn $

Disagree. Your Dunedin condo will be worth the same in 30 yrs IMO. I know many centi-millionaires in Florida who wouldn't touch real estate there today. Only oceanfront property has a shot, mine down a mere 25% from the peak because it's an established and well maintained building. I could care less as I enjoy it for pure recreation regardless.

CG's cap rate comments are also off base. I'm sure they don't factor in real vacancy, extremely high turnover, enormous maintenance costs, lack of financing etc.

CG, you may be a saint as a person but in this realm you are a shill. If i was a developer you would be at the top of my list to market my units. I respect your abilities very much and wish you further luck and success.

 

[interested]

Disagree. Your Dunedin condo will be worth the same in 30 yrs IMO. I know many centi-millionaires in Florida who wouldn't touch real estate there today. Only oceanfront property has a shot, mine down a mere 25% from the peak because it's an established and well maintained building. I could care less as I enjoy it for pure recreation regardless.

CG's cap rate comments are also off base. I'm sure they don't factor in real vacancy, extremely high turnover, enormous maintenance costs, lack of financing etc.

I agree with CN Tower's conclusions about oceanfront property. However, I am not in the same league as CN Tower or his wealthy clients.

In our neighbourhood; prices on the ocean did go up almost 300% from 2000 to 2006; they also fell 200% but as the supply is dwindling; prices are increasing again and have gone up about 20% from the bottom. There is little supply now as it was bought up at the cheaper valuations.

We are talking about an established area; small footage condo in a large building directly on the ocean but not with ocean view in our case. The building is 40 years old.

There are: special assessments; complicated tax rules and needs to pay withholding tax on rent if you are renting out the condo; high maintenance and taxes etc. which need to be considered.

The real investment decision I believe should be: Does the investment stand up on its own merits if it were not being influenced by the decision to get personal use. If the the answer is no; then it should only be bought for the exact reasons CN Tower says: for pure personal enjoyment. If one gets some positive investment potential; all the better.

I also agree the Cap Rates quoted by CG are optimistic. Presently there are more renters as people continue to be forced out of their homes and cannot buy (tight credit and don't qualify) so there is increased rental demand. If the economy improves, and credit tightness eases; look for decreased rental demand and falling rental rates which are up only just recently (past few years in a significant fashion).

Remember; most of Florida does not have wealthy people other than some retirees in certain locations. The working populations average salaries are in fact quite low; even in Miami.