KA1
Senior Member
Thanks for your moral support, Pal. This is something I need badly on this thread.
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Baby, we got a bubble!?
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Thanks for your moral support, Pal. This is something I need badly on this thread.
macookie
Active Member
So it's about me, until... it's about someone else not making a living off of real estate. That's fine. For you to feel better and for investors purchasing pre-sale condos today who are paying $750/psf or more... we all need to push the RE market along and markets rents to loftier values, with no concern about how others will actually make the payments... so that developers, investors, real estate agents, mortgage brokers and especially banks can continue to rake in the cash by the fistfuls. Rather that modest gains that are fairly equal to income gains or the CPI, we need as a society these EXCESSIVE PROFITS for some certain "individuals." Hence... we need the market to be higher tomorrow... so the game of RE monopoly can continue merry, until the end of time. Yeah, it's all about me... I better go consume a condo or two, and get into the GAME... that way I can PROFIT too.
KA1
Senior Member
... Yeah, it's all about me... I better go consume a condo or two, and get into the GAME... that way I can PROFIT too.
To get into the game, you got to have 'Balls' .. not the ordinary ones, but 'steel balls'. Just keep that in mind before you try to take a dip
interested
Senior Member
Macookie,
Reading your previous post there is some bitterness that comes through. That said, i agree with you that the socially responsible thing is to have affrordable housing available for the majority and that does not appear to be happening.
The reality is that a lot of people on both sides of this equation.
Some waiting for a burst so they can enter and capitalize on other people's misery and others who are "riding the wave" and making a large profit at the expense of others who would like to enter the market. And in between, all those in the R/E hierarchy that was referred to.
One comment I would make is that a serious meltdown will not only harm speculators or investors but main street home owners. The effect on the whole economy would be devastating and so everyone will suffer. Home prices will go down. Unemployment up. the currency likely go down which will ikely mean more expensive imports and overall a lower standard of living.
So be careful for what you wish as it may not unfold as you suggest.
I disagree with ka1: You do not need to have balls to get in this market. Rather I feel it would be unwise to enter at this point but then I thought that in 2008 which proved incorrect as Ka1 has pointed out to me numerous times. I think rather it is not balls but frankly stupidity to buy at these prices unless one is buying for personal use, has a secure job, and is willing to live in the location for years. Again just my opinion. am I selling all my investment real estate. No. Am I buying more at these prices....No. I think it will go down but given tax implications and expenses to buy/sell, I will just sit back and hope it does not end up being quite as bad as Macookie hopes but that it regulates to allow people to invest and get a reasonable roof over their head at a "reasonable price" even if this costs me money.
Reading your previous post there is some bitterness that comes through. That said, i agree with you that the socially responsible thing is to have affrordable housing available for the majority and that does not appear to be happening.
The reality is that a lot of people on both sides of this equation.
Some waiting for a burst so they can enter and capitalize on other people's misery and others who are "riding the wave" and making a large profit at the expense of others who would like to enter the market. And in between, all those in the R/E hierarchy that was referred to.
One comment I would make is that a serious meltdown will not only harm speculators or investors but main street home owners. The effect on the whole economy would be devastating and so everyone will suffer. Home prices will go down. Unemployment up. the currency likely go down which will ikely mean more expensive imports and overall a lower standard of living.
So be careful for what you wish as it may not unfold as you suggest.
I disagree with ka1: You do not need to have balls to get in this market. Rather I feel it would be unwise to enter at this point but then I thought that in 2008 which proved incorrect as Ka1 has pointed out to me numerous times. I think rather it is not balls but frankly stupidity to buy at these prices unless one is buying for personal use, has a secure job, and is willing to live in the location for years. Again just my opinion. am I selling all my investment real estate. No. Am I buying more at these prices....No. I think it will go down but given tax implications and expenses to buy/sell, I will just sit back and hope it does not end up being quite as bad as Macookie hopes but that it regulates to allow people to invest and get a reasonable roof over their head at a "reasonable price" even if this costs me money.
cdr108
Senior Member
what is your definition of a 'serious meldown'?
while it's true that a meltdown would be devastating, being over-burdened with high debt loads from mortgages for the inflated prices is just as bad, especially when the introductory low rates expire within 5 years.
for every extra dollar taken away for basic necessities, that results in less money for discretionary use, which results in the same thing .... unemployment, lower standard of living, etc.
macookie
Active Member
After selling a house in Windsor, Ontario at a loss... I know the feeling of a market that goes south. Yes, I know bitterness. I know what writing a cheque to the bank feels like when you sell a house. I understand what an underwater mortgage feels like. I will never ever do that again in my lifetime. I don't know what losing a house feels, or losing a job feels like... but I suppose it's like being told you have cancer... that it feels like your world is collapsing... but you know what... eventually it doesn't feel so bad, eventually you move on with life. You accept it and you put your energy into dealing with what you can change in your life.
I've talked with my friends that have underwater mortgages from the United States that live in the suburbs of Detroit... yeah it sucks that you're paying for something that is worth less that what you owe. Yeah, it sucks, that some people got rewarded and have purchased foreclosed homes for $20K... but you know life isn't always fair... nor does everything work out perfectly as you thought it would when you made the decision that you now regret.
Karma sometimes gets back at you... and sometimes she rewards you for being for your patience, and for what pain you go through on your journey... I don't need to be greedy, I don't need to have steel balls, and I certainty don't have to give respect to the real estate industry nor do I need to cheerlead from the sidelines for higher prices for homes that are unaffordable for the average citizen. But, maybe I and other individuals in Canada in the future need to earn what a Foxconn worker gets paid to build an iPad... to truly understand unbalanced global income inequality.
Sometimes what we don't wish for is truly what we deserve.
KA1
Senior Member
http://www.theglobeandmail.com/repo...o-slow-booming-housing-market/article2378722/
CMHC moves to slow booming housing market
CMHC moves to slow booming housing market
interested
Senior Member
I agree with your thoughts cdr. I think we could agree that the reality is that the housing market, and the spin offs such as appliances, furniture, renovations etc. are a significant portion of the economy. As well, people's wealth and perception of wealth is affected by their homes since for most it represents a significant portion of their wealth.
The reality is that a significant drop in price or wealth destruction will also be felt by the economy and everyone as a whole. what defines a significant drop? We could quibble the point but I think it would be beneficial if prices stopped rising for a few years and even dropped 5-10%. Much beyond that 10% figure and it gets a little more unclear to me. 20% wealth destruction combined with an increased interest rate will be very toxic to those who entered the market in the past 2-3 years. If it is more than 20% and to the tune of 30%; I think the destruction to the whole economy would be very severe as confidence would be shattered and people would not spend thereby aggravating the overall problems.
interested
Senior Member
Macookie: A few thoughts on this post:
I can tell you as someone who is a bit older and with lots of grey (white) hair; I have heard it said again and again and by some quite wealthy people: If you don't have your health, you have nothing. so I think the example relating to cancer is perhaps a bit extreme. Of course people deal with it but it is devastating and all the talk of financial wealth destruction is not in the same league in my view.
I don't wish ill to anyone. Of course in the financial world, when blood is in the water, the sharks pool. So some business decisions end up being great money makers, and some unfortunately lose money. As such, when the market goes down as it did in your Windsor example; you lose money. then, hopefully, the ship rights itself and you make money which i believe you eluded to if I recall correctly in some purchases in Toronto which have gone up.
I have often said it pays to be smart but it is better to be lucky. If you happen to be at the right place at the right time you can make decisions that look great. The reality is that anyone who bought any realestate in Toronto in the past 10 years (save for a brief 8-9 month period at the end of 2008 to 2009) made money on paper at least.
I recall people I knew who moved to Vancouver in the mid 1980's from Toronto and people who moved the other way. Those who moved to TO made money and those who moved to Vancouver lost. I even recall some people who moved out west and then back and lost twice and people who went the other way and doubled up their money. In both cases they were Air Canada pilots who transferred. One went from a $100K home to a $500K home and the other went from $200 to $100K essentially. Just because they happened to go in opposite directions. So there will always be "bad karma" and "good karma".
Personally, I feel people should be able to afford a roof over their head if they wish to put in the work and buy it. I think it is sad that housing has become a commodity because it results in it trading as such. Most people can avoid the stock market and simply not invest. A roof over one's head however is not always an elective choice. True one can rent but I believe one should be able to buy at a reasonable price if one has the desire. But that is the socialist in me I guess.
The above said, I agree with you that all of this is not a reason to throw common sense and rationality to the wind. You have clearly stated that you feel the market is overpriced. As ka1 says; time will tell. I happen to agree with you. If the market continues to rise for the next 2-3 years, we will at least in the short term, both be proven wrong. If it retreats, you can at least say you used common sense and in that case were proven right.
My feeling is that all on this forum and elsewhere should make rational thought out decisions. Obviously we won't all be right but at least one can afterwards look at it if the decision is wrong and at least console oneself that one made a decision with the best information at the time as opposed to looking if the decision was wrong and made just because the herd moved in a direction and console oneself with the thought that one threw caution and rationality to the wind.
sorry for the long winded post.
interested
Senior Member
Thank you for the article. Essentially CMHC has allowed the moral hazard to continue here. The slowing is a bit late and is closing the barn door after the horse is out. The CMHC mortgage amounts went from $350 to close to $600 billion in 5 years, allowing a lot of people to buy properties who should not have been in the market.
They are in the black by virtue of the continuing low interest rates. If CMHC stops backstopping alot of these mortgages, and interest rates go up, and Canadian incomes have not been going up anywhere near the price of real estate; what happens when everyone wakes up to the reality that prices are inflated.
the reason I have been wrong all along these past 3 years is that I did not expect interest rates to fall to 50 year lows (call me stupid for figuring they would revert more to previous norms) and that CMHC would support another $200-250 billion over the past 5 years of mortgages downloading this risk to the taxpayer. So if i may suggest perhaps I did not see the big picture as you eluded to before completely but in fact i would argue that I saw it quite clearly as did some policy makers who are now desperately trying to undo the "stupidities of the past few years". You are right ka1, I could not have anticipated that the government would do the moves it did after 2008. All they have done is succeeded in postponing the day of reckoning. Perhaps a bit like Greece(not saying anywhere near as bad) but desperate attempts to postpone the inevitable with obvious tremendous pain now to unwind all the additional years of the madness. this is the scenario I fear the longer the "housing boom" continues.
I am just not convinced CMHC; Flaherty or Carney can engineer a proper soft landing. I would like to think their desire to accomplish this is because they have woken up to the "big picture" which you have eluded to that I have not seen.
I await with baited breath for your response.
cdr108
Senior Member
agreed, but i don't have a good feeling that we in Canada/Toronto would have just a price freeze so that wages can catch up ... it's never happened anywhere, anytime.
current interest rates are 300-400 basis points below the historical average, and IMO that has contributed to the fueling of the buying frenzy and frothy evalutions ... this will not bode well for those who have over-extended themselves, and by extension, the greater overall population and economy.
Eug
Senior Member
Vancouver announces rent bank
The City of Vancouver announced a three-year commitment to help fund a rent bank that will provide emergency loans for low-income citizens in danger of eviction.
The rent bank will provide one-time loans to employed renters whose housing is threatened by financial difficulties.
“The rent bank will help people get over the hump,” said Coun. Kerry Jang. “We don’t want families in desperate need to be choosing between paying rent and buying food.”
Loans will be given for rents or housing-related costs in arrears, such as utility bills, and could help an estimated 540 people in the coming three years.
The loans are designed for singles, couples and families who may be living paycheque to paycheque and find themselves in financial crisis.
Applicants must show need, and demonstrate that they have a viable means for repayment over a two-year period.
Recipients must participate in a financial literacy course to help them budget and prevent future need.
The City of Vancouver announced a three-year commitment to help fund a rent bank that will provide emergency loans for low-income citizens in danger of eviction.
The rent bank will provide one-time loans to employed renters whose housing is threatened by financial difficulties.
“The rent bank will help people get over the hump,” said Coun. Kerry Jang. “We don’t want families in desperate need to be choosing between paying rent and buying food.”
Loans will be given for rents or housing-related costs in arrears, such as utility bills, and could help an estimated 540 people in the coming three years.
The loans are designed for singles, couples and families who may be living paycheque to paycheque and find themselves in financial crisis.
Applicants must show need, and demonstrate that they have a viable means for repayment over a two-year period.
Recipients must participate in a financial literacy course to help them budget and prevent future need.
marsh
Active Member
RE: significantdrop/wealth destruction: I thought this report from The Economist (previously posted) put things in perspective in terms of worst case scenarios and how quickly things can spiral out of control:
For Greece, in economic terms, it’s now calendar year 1999. For Iceland, it’s 2000, the dawning of the millennium. For Portugal, Latvia and the United States, it’s 2002, a full decade ago. For Ireland, it’s early 2003; for Hungary, late 2003. For Britain and Spain, it’s 2004. For Italy, it’s 2005. For France, it’s 2006. For Germany, with the least “lost time” of the major industrialized countries, it’s late 2009.
I know not all of the countries economic problems listed above are due to real estate bubbles bursting, but certainly the US, Britain, Spain and Ireland all had significant real estate bubbles burst. Imagine a decade of economic growth wiped out.
I think the majority of the people on this forum who are predicting or are concerned about the Toronto real estate market bursting are not really wanting or wishing it to happen - they are concerned about the broader economic consequences.
I'm glad that at least certain steps are being taken to rein in mortgage lending but I wonder about their impact as long interest rates remain low (likely until 2014 as the US Fed have said they will keep interest rates low until then I believe - and that really hamstrings what the BOC can do).
For Greece, in economic terms, it’s now calendar year 1999. For Iceland, it’s 2000, the dawning of the millennium. For Portugal, Latvia and the United States, it’s 2002, a full decade ago. For Ireland, it’s early 2003; for Hungary, late 2003. For Britain and Spain, it’s 2004. For Italy, it’s 2005. For France, it’s 2006. For Germany, with the least “lost time” of the major industrialized countries, it’s late 2009.
I know not all of the countries economic problems listed above are due to real estate bubbles bursting, but certainly the US, Britain, Spain and Ireland all had significant real estate bubbles burst. Imagine a decade of economic growth wiped out.
I think the majority of the people on this forum who are predicting or are concerned about the Toronto real estate market bursting are not really wanting or wishing it to happen - they are concerned about the broader economic consequences.
I'm glad that at least certain steps are being taken to rein in mortgage lending but I wonder about their impact as long interest rates remain low (likely until 2014 as the US Fed have said they will keep interest rates low until then I believe - and that really hamstrings what the BOC can do).
Eug
Senior Member
If Toronto reverts to March 2009 for home pricing, that'd be about a one-quarter haircut from current pricing.
If Toronto reverts to Nov. 2009 for home pricing, that'd be about a 15% haircut from current pricing. Nov. 2009 is when this thread started.
March 2009 prices are about 12% below Nov. 2009 prices, so to put it another way, prices would have to drop 30-35% from today's prices to achieve a significant (> 10%) price drop from when this thread started, when the doom-and-gloom predictions in this thread began.
If Toronto reverts to Nov. 2009 for home pricing, that'd be about a 15% haircut from current pricing. Nov. 2009 is when this thread started.
March 2009 prices are about 12% below Nov. 2009 prices, so to put it another way, prices would have to drop 30-35% from today's prices to achieve a significant (> 10%) price drop from when this thread started, when the doom-and-gloom predictions in this thread began.
daveto
Active Member
Eug, are you adjusting figures for inflation? (ie back into 2009 figures) If not, then with 7% inflation in the past 3 years, the required 30-35% reduction you reference would actually be 21-26%.
Notwithstanding that I would say,yes, 30-35% sounds about right to me. (ie approx -20% from when this thread began)