Author Topic: For all the Canadians Out There - Think About What You Are Doing.  (Read 10459 times)

tooqk4u22

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You should already be aware of this, but this is similar to the US in 2007 so be cautious - the housing/mortgage market in Canada is different, as are the banks, and it will not likely spill over to other economies but it may have a fairly big impact on the Canadian economy.  Moody's has also downgrade the largest banks in Canada due to this.

As I have suggested elsewher it might be wise to diversify outside of Canadian equities. 


http://www.theatlantic.com/business/archive/2013/01/the-biggest-housing-bubble-in-the-world-is-in-canada/272499/

http://www.economist.com/news/finance-and-economics/21569396-our-latest-round-up-shows-many-housing-markets-are-still-dumps-home


fuzzed

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #1 on: January 30, 2013, 11:30:54 AM »
Did Moody's say anything about Enron? hopefully they are still AAA. ;)

tooqk4u22

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #2 on: January 30, 2013, 11:50:05 AM »
I could care less about rating agencies, but in theory they should be better now than before given lessons learned.

I do care more about that almost all of the Canadian banks have expressed concern about housing, debt and overall economic growth in Canada, and the government has begun tighting up mortgage standards to try to reign it in without looking like it is trying to do so, so it is not perceived as an issue. 


fuzzed

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #3 on: January 30, 2013, 12:14:03 PM »
As you can see, I agree 100% with your view on ratings agency.

I have wondered if everyone in Canada stopped buying houses, cars, traveling, furniture etc, and just focused on paying down their debts, how well the economy would do.   Personally, I find when you have little to no debt, banks actually become more suspicious of you.  Case in point, myself.   I work for a large financial institution, I have my registered and non registered investments with them, my pension, and a credit card with a 5000 limit and a zero balance.  I normally pay for my credit card the same day i use it.   Anyways, I decided last year to get an unsecured line of credit for 15k, just so I had it.    We own 3 properties out right, and have zero debt.  The bank, which i work for, was going to charge me $35 so they could do a title search on the properties to prove we owned them outright.  This for an UNSECURED line of credit.  I escalated a couple of levels in the bank, but they still needed proof that we owned the properties outright before they would grant me an UNSECURED line of credit... 

Anyways, my thought is, if an employee of the bank with a good income, no debt, 6 figures in investments within the bank, 3 properties cannot get an unsecured line of credit, what hope does someone with mediocre credit have?

I am sure in places like Vancouver and the GTA things are out of control, maybe, but not everywhere.  I guess I can always be proven wrong when the great fall comes, will need to gather grain, ammo, and spam to survive  </rant>  thanks for listening.

tooqk4u22

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #4 on: January 30, 2013, 12:23:22 PM »
I am sure in places like Vancouver and the GTA things are out of control, maybe, but not everywhere.  I guess I can always be proven wrong when the great fall comes, will need to gather grain, ammo, and spam to survive  </rant>  thanks for listening.

Look back to the US in 2007 - it wasn't everywhere that was overheated and it wasn't everyone that had too much debt, but it doesn't take much for it slow and create issues for the broader economy.

fuzzed

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #5 on: January 30, 2013, 12:28:52 PM »
I guess we have been brainwashed into thinking that everyone who could say (not necessarily spell) their own name could qualify for a 500k mortgage during the mid 2000's in the USA without having a job or a fixed address.  I kind of thought is was pretty much everywhere...

I am envious of the folks on this board who can actually buy a reasonable house for 25k, fix it up and rent it out or sell it for a tidy profit, maybe the big correction cannot come soon enough up here.

Norman Johnson

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #6 on: January 30, 2013, 12:53:00 PM »
The housing market is definitely cooling here. I'm starting to see houses go for under the list price and sitting on the market longer and longer. I'm thinking that in my market we have hit the top and I think about selling, but we like where we live while we are working and if shit goes down, this will make a nice rental as far as location goes.

tooqk4u22 - Are you American or Canadian? I'm interested on your perspective and thoughts on why "this is similar to the US in 2007"

tooqk4u22

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #7 on: January 30, 2013, 12:55:18 PM »
I guess we have been brainwashed into thinking that everyone who could say (not necessarily spell) their own name could qualify for a 500k mortgage during the mid 2000's in the USA without having a job or a fixed address.  I kind of thought is was pretty much everywhere...

That was true but not everyone did it.....even at the height of the market a third of all homes were owned without mortgages and of those remaining a good chunk were low to moderately levered.   


I am envious of the folks on this board who can actually buy a reasonable house for 25k, fix it up and rent it out or sell it for a tidy profit, maybe the big correction cannot come soon enough up here.

Umm, yeah me too and I am in the US.

FWIW - I don't thing there will be crisis in Canada but there I do expect a slowdown and moderately declining values.


tooqk4u22

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #8 on: January 30, 2013, 01:07:26 PM »
The housing market is definitely cooling here. I'm starting to see houses go for under the list price and sitting on the market longer and longer. I'm thinking that in my market we have hit the top and I think about selling, but we like where we live while we are working and if shit goes down, this will make a nice rental as far as location goes.

tooqk4u22 - Are you American or Canadian? I'm interested on your perspective and thoughts on why "this is similar to the US in 2007"

I am from the US.  It is similar because the government has promoted the growth in housing to unsustainable levels based on a high debt to income (39% on mortgage, 44% overall - both are too high), have allowed longer amortization periods (35years until 2011) and has provided mortgage insurance for high LTV loans (95%) and equity lines.  A lot of this has changed during 2011 and 2012 as the government is now trying to reign it in (i.e now it is limited to 25 year amortization) - just going from 35 year amo to 25 year amo - reduces borrowing capacity by 15% assuming the same interest rate.  We had quasi government setting the market along with a dysfunctional securities market.  Just because the Canadian govt has allowed certain things doesn't mean that they are right.

Its good that they are trying to address it and slow it down so it down as opposed to letting it crash, which is what happened in the US and was caused by securtizations/CDOs etc.  If they manage it right the air will come out, housing prices will dip moderately and economic growth will wane a bit but Canada has the Natural resources that will offset a bit of that - unless of course the dollar strengthens signifcantly. 

Canada and its banks were largely spared from the US mortgage crisis primarily because they simply didn't invest anywhere other than Canada.  Afterward, all the Canadian banks got on the high horse and said how they are were so right because they were so conservative - well they may have believed they were smarter and now it looks frothy and that may not be the case. 
« Last Edit: January 30, 2013, 01:11:51 PM by tooqk4u22 »

Khao

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #9 on: January 30, 2013, 01:49:07 PM »
FWIW - I don't thing there will be crisis in Canada but there I do expect a slowdown and moderately declining values.

That's what I also think. I just bought a condo even though I'm pretty sure it will lose value in the coming years because I really wanted to own my place but I'm preparing for it :

I will add very little extra cash towards the mortgage payment, I'll only pay minimum and invest all my extra cash in TFSA, unregistered account and RRSP (in that order) so that if/when the market dips, I can buy a rental easily like a duplex or triplex. I don't plan to sell the condo if its value goes down and I can live in it a couple extra years or rent it out.

Deano

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #10 on: January 30, 2013, 01:59:47 PM »
FWIW - I don't thing there will be crisis in Canada but there I do expect a slowdown and moderately declining values.

That's what I also think. I just bought a condo even though I'm pretty sure it will lose value in the coming years because I really wanted to own my place but I'm preparing for it :

I will add very little extra cash towards the mortgage payment, I'll only pay minimum and invest all my extra cash in TFSA, unregistered account and RRSP (in that order) so that if/when the market dips, I can buy a rental easily like a duplex or triplex. I don't plan to sell the condo if its value goes down and I can live in it a couple extra years or rent it out.

You might want to watch out for a rule change (not sure when it happens). I believe new rules force you to pay the difference upon mtg renewal if your house is underwater. i.e. if you owe 200k on your mtg on renewal and the bank deems it be worth 150, you'd have to cough up 50k to get your renewal. Scary if you have little equity. Maybe split the difference b/t TFSA and mtg ?

Khao

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #11 on: January 30, 2013, 02:17:48 PM »
You might want to watch out for a rule change (not sure when it happens). I believe new rules force you to pay the difference upon mtg renewal if your house is underwater. i.e. if you owe 200k on your mtg on renewal and the bank deems it be worth 150, you'd have to cough up 50k to get your renewal. Scary if you have little equity. Maybe split the difference b/t TFSA and mtg ?

Do you have any source for this? I did a quick google search and did not find what you were talking about. I'd love to read about it and prepare for the worst case scenario accordingly.

Le Dérisoire

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #12 on: January 30, 2013, 02:28:50 PM »
Finally a thread about the housing bubble in Canada. The question is not if there's one, but when it will burst and how bad it will be.

If you have any doubt that real estate is about to crash everywhere in Canada pretty soon, please look at the following graphs and consider the fundamentals:

http://www.greaterfool.ca/2012/01/08/in-the-end/
http://theeconomicanalyst.com/content/canadian-construction-slowdown-cards-catch-22s-everywhere-montreal-next-shoe-drop
http://www.zerohedge.com/news/2012-11-05/guest-post-canadas-housing-bubble-different
http://www.torontocondobubble.com/

I've been renting for 2 years even if I could buy a great house just to wait for the crash. I'm also considering shorting Home Capital Group when the time comes (using put options).

Deano

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #13 on: January 30, 2013, 03:13:48 PM »
You might want to watch out for a rule change (not sure when it happens). I believe new rules force you to pay the difference upon mtg renewal if your house is underwater. i.e. if you owe 200k on your mtg on renewal and the bank deems it be worth 150, you'd have to cough up 50k to get your renewal. Scary if you have little equity. Maybe split the difference b/t TFSA and mtg ?

Do you have any source for this? I did a quick google search and did not find what you were talking about. I'd love to read about it and prepare for the worst case scenario accordingly.

I first read it in Garth Turner's blog greaterfool.ca, he's a source I generally trust. I also saw something to do with this in a newspaper, could have been the globe. If anyone else can find it, please post a link, I'll do likewise.

Self-employed-swami

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #14 on: January 30, 2013, 04:10:48 PM »
I'm expecting a 3-10% correction, depending on the market.  Considering I only owe $131,000 on a house I paid $374,000 for, I'm not too concerned.  Let my property taxes drop :)

We might be in the market for a rental property in a few years, so it wouldn't hurt me at all.

strider3700

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #15 on: January 30, 2013, 04:16:20 PM »
There has to be some sort of change and it's likely going to be ugly.

  What's going to happen to everyone that is barely getting by on their payments when rates are so low already?  I know people that are overjoyed they managed to change their 4% 5 year fixed to a 2.8% variable  because they were dying under the interest on the 4% payment.    Umm historic norm is something like 9%  and really rates can't go much lower then the 3% they've been at for a 5 year fixed.    Already unless you're will to take a loss you can't sell and get out so they're screwed. 

 I happen to agree with Garth Turner as well - Mortgage rates will start climbing even though the bank of Canada is keeping rates low. 

I'm not sure how your property taxes are calculated but my house lost 5% value over last year.  Taxes are still going to be up 3-4% because the entire area lost 5% in value so my taxes don't really change relative to the rest of town.

Self-employed-swami

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #16 on: January 30, 2013, 04:22:20 PM »
http://www.calgary.ca/PDA/Assessment/Pages/Property-assessment/Property-assessment.aspx

Our city decides the tax rate, and then that is applied to the fair market assessment.  They usually let the tax rate stay rather constant, while the increases in revenue come from the increases in property value.

jd

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #17 on: January 31, 2013, 10:57:38 AM »
FWIW - I don't thing there will be crisis in Canada but there I do expect a slowdown and moderately declining values.

That's what I also think. I just bought a condo even though I'm pretty sure it will lose value in the coming years because I really wanted to own my place but I'm preparing for it :

I will add very little extra cash towards the mortgage payment, I'll only pay minimum and invest all my extra cash in TFSA, unregistered account and RRSP (in that order) so that if/when the market dips, I can buy a rental easily like a duplex or triplex. I don't plan to sell the condo if its value goes down and I can live in it a couple extra years or rent it out.

You might want to watch out for a rule change (not sure when it happens). I believe new rules force you to pay the difference upon mtg renewal if your house is underwater. i.e. if you owe 200k on your mtg on renewal and the bank deems it be worth 150, you'd have to cough up 50k to get your renewal. Scary if you have little equity. Maybe split the difference b/t TFSA and mtg ?

The OSFI backed off of the proposed rule changes to requalify for your mortgage upon renewal:
http://www.theglobeandmail.com/report-on-business/regulator-dials-down-proposed-mortgage-rule-changes/article4236287/

But you can still run into problems when your mortgage renews.  In most cases your existing bank will automatically renew your mortgage.  But if they don't (see http://www.milliondollarjourney.com/mortgages-not-being-renewed.htm), or you want to switch to a different bank (i.e. for a better rate), the new bank may want to appraise your house, and may not lend you enough money to pay out your existing mortgage.

Khao

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #18 on: January 31, 2013, 12:25:32 PM »
The OSFI backed off of the proposed rule changes to requalify for your mortgage upon renewal:
http://www.theglobeandmail.com/report-on-business/regulator-dials-down-proposed-mortgage-rule-changes/article4236287/

But you can still run into problems when your mortgage renews.  In most cases your existing bank will automatically renew your mortgage.  But if they don't (see http://www.milliondollarjourney.com/mortgages-not-being-renewed.htm), or you want to switch to a different bank (i.e. for a better rate), the new bank may want to appraise your house, and may not lend you enough money to pay out your existing mortgage.

Thanks for the additionnal info and the links! Seems like I don't have much to worry about my mortgage other than the possibility that I will have a bigger mortgage than my condo value, but at least I'm mentally and financially prepared for it.

tooqk4u22

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #19 on: January 31, 2013, 01:25:50 PM »
The OSFI backed off of the proposed rule changes to requalify for your mortgage upon renewal:
http://www.theglobeandmail.com/report-on-business/regulator-dials-down-proposed-mortgage-rule-changes/article4236287/

But you can still run into problems when your mortgage renews.  In most cases your existing bank will automatically renew your mortgage.  But if they don't (see http://www.milliondollarjourney.com/mortgages-not-being-renewed.htm), or you want to switch to a different bank (i.e. for a better rate), the new bank may want to appraise your house, and may not lend you enough money to pay out your existing mortgage.

Thanks for the additionnal info and the links! Seems like I don't have much to worry about my mortgage other than the possibility that I will have a bigger mortgage than my condo value, but at least I'm mentally and financially prepared for it.

Maybe not now....but this is an example of regulators being deferential to political and economic demands and not because of prudency.

Deano

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #20 on: January 31, 2013, 04:26:15 PM »
I'm expecting a 3-10% correction, depending on the market.  Considering I only owe $131,000 on a house I paid $374,000 for, I'm not too concerned.  Let my property taxes drop :)

We might be in the market for a rental property in a few years, so it wouldn't hurt me at all.

3-10% average? That would mean that some areas would be largely unaffected and others will be smoked. Let's hope you're in the former!

strider3700

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #21 on: January 31, 2013, 05:39:42 PM »
I wouldn't be at all shocked to see a 30% pull back in vancouver and surrounding areas.  That could easily spill over and drag the island down close to as far since we're advertised as cheap compared to vancouver  and it's only a 90 minute ferry ride away....

My place has roughly doubled in the last 10 years.  Too bad I bought 4 years ago right at the top.  At least it would have to cut in half for me to go underwater on it and the vast majority of that equity came from the sale of my old place that also doubled so imaginary wealth gained then lost.
« Last Edit: January 31, 2013, 05:41:54 PM by strider3700 »

Le Dérisoire

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #22 on: January 31, 2013, 07:21:29 PM »
I'm expecting a 3-10% correction, depending on the market.  Considering I only owe $131,000 on a house I paid $374,000 for, I'm not too concerned.  Let my property taxes drop :)

We might be in the market for a rental property in a few years, so it wouldn't hurt me at all.

Where do you get that 3-10% figure?

When I look at the ratio house prices / income it seems to me that we're looking at a 30% drop across Canada (it's an average, so much more in vancouver and much less in Iqaluit).

When I compare the house prices in Canada and the house prices in the US since 1980, I see that a 40% correction is upcoming if the prices had the same growth rate in 2000-2013 than in 1980-2000. The actual house prices in the US are actually right there.

But I'm not an economist. Maybe I'm not looking at the right thing. Or maybe THIS TIME it's different because god knows what.

Sorry for my terrible english.

Self-employed-swami

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #23 on: January 31, 2013, 08:45:14 PM »
I'm expecting a 3-10% correction, depending on the market.  Considering I only owe $131,000 on a house I paid $374,000 for, I'm not too concerned.  Let my property taxes drop :)

We might be in the market for a rental property in a few years, so it wouldn't hurt me at all.

Where do you get that 3-10% figure?

When I look at the ratio house prices / income it seems to me that we're looking at a 30% drop across Canada (it's an average, so much more in vancouver and much less in Iqaluit).

When I compare the house prices in Canada and the house prices in the US since 1980, I see that a 40% correction is upcoming if the prices had the same growth rate in 2000-2013 than in 1980-2000. The actual house prices in the US are actually right there.

But I'm not an economist. Maybe I'm not looking at the right thing. Or maybe THIS TIME it's different because god knows what.

Sorry for my terrible english.

I got that figure from a recent Macleans' article.

http://www2.macleans.ca/2012/01/26/what-happens-when-canadas-housing-bubble-pops/

The hardcopy version had a chart, by city.  My city is projected to experience a 3% decline.  The 10% number comes from the article.


Le Dérisoire

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #24 on: January 31, 2013, 09:44:15 PM »
That Macleans' article is perpetuating the 'soft landing' myth, even if a bubble never ended that way in the whole history of capitalism.

At some point, the general population will lose confidence in the real estate market and all the news will say that 'it's no time to buy'. When it happens, why would anyone buy a house at only 3 or 4% less than what it was at the top of the bubble when everyone knows that the price will be even lower in a few months (such a big, unprecedented bubble has to 'soft land' at least for a few years)? Everyone will simply stop buying because of fear 'until it gets better' and their will be an immediate crash of much more than that.

If the market is inflated, and the fundamentals say it is, it can only keep going up or stay up if people have a false sense of confidence.

It this case, confidence is fueled by ignorance. Do you know a lot of people that check the historic data and trends before buying a house? I don't. Common knowledge dictates that "you can never be wrong with real estate because it's the most secure asset and it always goes up". Until the headlines say otherwise...

Brace for impact.

totoro

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #25 on: January 31, 2013, 10:12:22 PM »
Garth turner...not a fan.  Very talented at self promotion but a bully with a pulpit online.  Say there will be a downturn for long enough and one day the cycle will match up.

Prices in Victoria bc are flat right now except condos are down.  I don't see prices crashing and def not rising.  I agree with the 3-10 percent drop projections unless rates rise - then bigger drops. Most don't project a rise in interest rates for a while.

I own three multifamily properties and would buy again with a drop if rates are low.  I do have 10 yrs on my mortgage because I am concerned about rates rising. 

GoStumpy

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #26 on: January 31, 2013, 11:08:55 PM »
Here in Kelowna prices have come down a good 25% since 2007... They won't go much lower, considering the $$$ the average person has, prices are actually 'normal' nowadays!

totoro

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #27 on: January 31, 2013, 11:50:08 PM »
Really? 25%?  I own in the Okanagan and prices are not down 25% from 2007 as far as I can tell.  I would believe 5% and harder to sell, but not 25%.

If you look at the stats from CMHC you will see -1.9% from 2008-2012. 
http://www.cmhc-schl.gc.ca/odpub/esub/64359/64359_2011_B02.pdf

Here is an actual chart of average prices since 2007:
http://www.trishwise.com/market-watch.html

Detailed monthly information on the Kelowna market is available here for free from CMHC:
https://www03.cmhc-schl.gc.ca/catalog/productDetail.cfm?cat=115&itm=3&lang=en&fr=1359700556875

strider3700

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #28 on: February 01, 2013, 12:36:33 AM »
the problem is those stats are brought to you by the realestate  and mortgage industry.  I trust their outlook on housing about as much as I trust a crack dealers views on cracks health benefits.   Listing prices around here haven't moved much  but there is very little selling.  The places that did sell around my house recently went at big discounts over asking when the owners got desperate to get out. 

Le Dérisoire

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #29 on: February 01, 2013, 06:10:10 AM »
Garth turner...not a fan.  Very talented at self promotion but a bully with a pulpit online.  Say there will be a downturn for long enough and one day the cycle will match up.

Prices in Victoria bc are flat right now except condos are down.  I don't see prices crashing and def not rising.  I agree with the 3-10 percent drop projections unless rates rise - then bigger drops. Most don't project a rise in interest rates for a while.

I own three multifamily properties and would buy again with a drop if rates are low.  I do have 10 yrs on my mortgage because I am concerned about rates rising.

The fact that you're not a fan of Garth Turner does not change the fundamentals. Garth Turner is maybe the louder, but he's not alone. Ask Mark Carney...

What I find the most interesting is that we can follow step by step the work of professor Jean-Paul Rodrigue on speculative bubbles.

It seems to me that we are pretty much in the 'denial' phase because of the recent slowdown in the market. I heard that the sells have gone up sky high again in january. Real estate agent have called that the 'return to normal'. http://en.wikipedia.org/wiki/File:Stages_of_a_bubble.png

GuitarStv

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #30 on: February 01, 2013, 06:34:29 AM »
I've lived in the GTA now for about nine years.  Each year, people say that the housing market is overvalued and too expensive . . . that we're headed for a crash.  Each year the housing prices go up 5 - 8%.  If we get a big crash, I'll look into purchasing a rental property.  If we don't, I'll keep paying off my house (hopefully only five years left) and will be happy that I pay less in mortgage than I did in rent.

totoro

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #31 on: February 01, 2013, 06:43:32 AM »
The fact that I'm not a fan of Garth Turner has nothing to do with past statistics at all.  It has everything to do with his presentation and manipulation of data and the way he attacks those who do not agree with his opinions fully even if they are credible and support with data and analysis - such as Ben Rabidoux.
http://www.theeconomicanalyst.com/content/more-bit-disappointed-garth-turner

Strider - CMHC has base statistics that are verifiable and reliable about sale prices and housing starts.  You do not have to agree with anyone's market outlook, including CMHC's, or any future predictions because they are future and unproven and not fact.  They are best guesses.  Your guess might be as good as anyone elses.   

It is more difficult to disagree with past facts reported from credible sources without reporting an alternative set of data that you are relying on.   I posted past facts and relied upon them to support the provable fact that prices have not dropped in Kelowna 25%.  You can verify this information independently and I have provided the links.  If you find the data suspect about past sales and prices, present an alternate source.

I live in the Okanagan part time and am very aware of what is happening there as I follow this market quite closely as we may buy another property there.  Real estate has not dropped 25%.  Maybe it will in the near future.  If so, we will buy.

I would agree that further up Vancouver Island has dropped.  I don't follow this market as closely because I'm not planning on buying so not sure how much but you can find this data.  Market conditions are quite local and respond to local demographics and conditions such as resource industry slumps or booms, as well as national factors such as interest rates and credit availability and incentives.  Core Victoria areas are flat.  Sooke has dropped a bit.

What I dislike are comments not supported by research and based on cursory reading of some article or what the neighbour said.  Anecdotal evidence can be helpful, but it can also be misinformed.

As far as a bubble in Canada, I would concur with Took.  My best guess is no dramatic crash but prices will drop.  We have had a long run up and RE markets don't rise forever in a straight line.  I could see a crash with a rise in interest rates or huge drop in employment.

GoStumpy

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #32 on: February 01, 2013, 08:09:04 AM »
You're right... I'm not quoting from research....

I am quoting on my own home's value, the value of homes in my neighborhood, the homes of my friends, their neighborhoods, and the listings on MLS's website.

Wait, isn't that research?

Le Dérisoire

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #33 on: February 01, 2013, 08:49:51 AM »
As for me, I am quoting the stats: Ratio house prices / income, construction starts over time, % of workers in construction, Canada house prices vs US house prices, house prices / inflation, house prices / consumer debt, etc.

http://www.greaterfool.ca/2012/01/08/in-the-end/
http://theeconomicanalyst.com/content/canadian-construction-slowdown-cards-catch-22s-everywhere-montreal-next-shoe-drop
http://www.zerohedge.com/news/2012-11-05/guest-post-canadas-housing-bubble-different
http://www.torontocondobubble.com/

The reason I was quoting these blogs are not because of the opinion of the authors, but because they made the effort to put the stats in nice graphs.

I agree that Garth is an ass. He reccommended to finance a car and pay it as slowly as possible because of the low interest, and invest in stocks instead. The thing is that the interest rate of the car loan is not the TRUE interest rate. Car sellers give you a "rebate" if you pay your new car in cash instead of financing it. The rebate is actually hidden interests so you never really pay '0% interest over 48 months'...
« Last Edit: February 01, 2013, 08:54:07 AM by Le Dérisoire »

totoro

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #34 on: February 01, 2013, 09:26:28 AM »
You're right... I'm not quoting from research....

I am quoting on my own home's value, the value of homes in my neighborhood, the homes of my friends, their neighborhoods, and the listings on MLS's website.

Wait, isn't that research?

I'm not sure how to answer that.  It is anectodal evidence of what is happening in your neighbourhood, the homes of your friends (current or past?), and the value of MLS listings somewhere based on your view of whether they are higher or lower than what?

Statistics need to be reliable and you need a comprehensive set of data to work from to be able to make verifiable statements.  Because my neighbours house in Victoria is taking a long time to sell does not mean the entire Canadian market has crashed.  It means the place is taking longer to sell.   Maybe it is horrible inside.  Maybe it is part of a larger trend.

Your anecdotal evidence leading you to a conclusion of a good 25% drop in Kelowna since 2007 is just plain wrong and you can review the data yourself on this - it is actually less than 2%.

GoStumpy

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #35 on: February 01, 2013, 05:03:17 PM »
Problem is, I don't exactly have records of MLS listings for the past 5 years... if we did I bet we could figure something out... and I'm willing to bet $ it'll be a LOT more than 2%.

If 'assessments' are ANY indication (not saying they are), a friends house is 14% lower than it was in 2007...

totoro

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #36 on: February 01, 2013, 05:07:55 PM »
Umm... I provided you with the links to the sales data from 2007-present - did you not check the links and look? 

It is not more than 2%.  Going forward, this number might increase.  The snowball can roll in either direction depending on market trends.

Assessments are not a reliable indicator of current selling prices.  Assessments are the estimate of the taxation authority for what a property would have sold in the preceding July.  Assessments are often quite different from selling price and are ballpark meaning that they are based on previous sales data and not on the actual condition of your place.


GoStumpy

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #37 on: February 01, 2013, 05:18:54 PM »
According to your link:

http://www.trishwise.com/market-watch.html

"Average" home price is ~13% down since 2008?

Apr 2008 $552k, Apr 2012 $482k  13%
Jan 2008 $483k, Jan 2012 $415k  14%

Or am I reading this wrong?

totoro

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #38 on: February 01, 2013, 05:27:32 PM »
Yes, you are reading it wrong.  You cannot pick one month in 2008 and compare it to another random month in 2008.  You need to compare year over year totals.  January is typically a slow month for sales and April picks up.  One month against another in the same month five years ago do not a trend make, nor do they make for solid and reliable statistical analysis.

GoStumpy

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #39 on: February 01, 2013, 05:35:24 PM »
Ok, if I average 2012's prices to $465k, and average 2008's prices to $500k, that's a 7% decrease...  Under a third of my 25% guess, but more than 3x your 2% guess?

totoro

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #40 on: February 01, 2013, 05:37:39 PM »
I believe you were referencing 2007?

Here we go on your measure:  May 2007 $396 2222         May 2012 487, 187    Prices increase by $90,000!

GoStumpy

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #41 on: February 01, 2013, 05:42:20 PM »
Do you think that thousands of new homes in Upper Mission for $500k+ has any affect on the 'Average House Price'?

That would allow thousands of homes in Glenrosa to reduce in value with no change to "Average House Price"

totoro

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #42 on: February 01, 2013, 05:49:31 PM »
I think that is a good point.  I think medians are a better measure as they knock out the highs and lows.  I prefer medians and will look for these measures but still think we are about 2% down from 2007.  This might change at some point.

GoStumpy

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #43 on: February 01, 2013, 05:51:51 PM »
Can we get along now?

Markets are so localized, I was merely injecting what I see with the people I talk with... My friends all live in Glenrosa, which has dropped in value moreso than a brand new development, I can assume... 90's non-updated homes skyrocketed, pretty much doubling in price from 2002-2008, and now have fallen a bit, but nowhere near where they were.

totoro

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #44 on: February 01, 2013, 06:18:51 PM »
Yes.  Canadians always get along :).  Might be some better times to buy coming up.

GoStumpy

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #45 on: February 01, 2013, 06:52:10 PM »
I hope it's going to be good in ~2018, that will be when I've saved up 50% down on a ~$350k home :)

totoro

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #46 on: February 01, 2013, 07:16:14 PM »
I think we will be slightly down from now - my best guess.  Hopefully interest rates are still low, if they rise prices will likely drop more.

GoStumpy

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #47 on: February 01, 2013, 07:25:44 PM »
I could see interest rates rising back to ~5.5% as the norm... My original mortgage in 2007 was 5.65% and that was LOW on average...

I'm going for a 15 year mortgage, with ~150k down, so I almost want interest rates to rise so house prices fall ;)

Deano

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #48 on: February 03, 2013, 12:52:34 PM »
This is awesome!

We've got it all in this thread...denial, competing "stats", anecdotal evidence on both sides....this is classic bubble talk.

There is no question Canada is in a housing bubble. The rise in housing prices is NOT supported by income growth, a necessary support for long term housing price increases (beyond a decade!). Want to see examples? http://www.theeconomicanalyst.com/content/house-price-and-income-ratios-canadian-cities-part-1.

Some thoughts....
-it has happened here before (80's and 90's!), so, it can certainly happen again.
-we are not different here just because of the nature of our loans or our banks. Housing prices can come down regardless of predatory lending practices
-when people are heavily invested in a bubble (emotionally and/or financially), they balk at its existence. We know this. Tulip bulbs anyone?
-a dwelling should not cost 10 times the average annual income. That isn't sustainable. Not ever. Even Borden's dripping in oil can't keep that going.

Yeah, I own a house, it's gonna lose a boat load of value. I can deal with it.

totoro

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Re: For all the Canadians Out There - Think About What You Are Doing.
« Reply #49 on: February 03, 2013, 01:02:25 PM »
Count me out of the endless debate.  I own cash flow positive places and don't care if prices drop unless they drop low enough to make another rental property look good.  Then I'll buy if rates are high.

Past reliable stats are not "classic bubble talk".  There is no denial of anything.  Prices can't go up forever cause it is not sustainable and real estate markets just don't work like that.  US-style crash?  I don't know.  Soft landing?  I don't know.

Contest of the best guessers is pretty boring and repetitive.  "I'm right"... "No, I'm right".  Might as well stare at a wall.

If others want to engage in this discussion, go to it.  May the best guesser get... oh wait, nothing except living with your personal choices.