Understanding Housing Collapse

[Chris L]

I think once people's attitudes change, buyers will start waiting longer, playing hard ball with sellers, etc. Once there are headlines about prices falling (even a small amount), people who can wait will wait...causing markets to stall, and prices to fall for people who have to sell...inventories begin to mount. Some will attempt to cash in their home investments before things get worse - further increasing inventories. Perhaps some bargain hunters who've been sitting on the sidelines waiting for drops will cushion things.. but I'm not sure their numbers are great enough to make a difference.

Don't forget "investors" who are either breaking even month-to-month hoping for price appreciation or even investors who are subsidizing tenants by a few hundred a month. Once price declines seem certain, there will be a huge rush for the exit.

I don't know many people who don't have investment properties anymore. Those who don't are certainly talking about getting one. Ten years ago, I was all by myself, I felt unique, and Robert Kiyosaki was just getting the word out! It's amazing to talk to people about RE now...everyone wants to grab a piece.

[Eclectic12]

Don't forget "investors" who are either breaking even month-to-month hoping for price appreciation or even investors who are subsidizing tenants by a few hundred a month. Once price declines seem certain, there will be a huge rush for the exit.

I don't know many people who don't have investment properties anymore. Those who don't are certainly talking about getting one. Ten years ago, I was all by myself, I felt unique, and Robert Kiyosaki was just getting the word out! It's amazing to talk to people about RE now...everyone wants to grab a piece.

Interesting ... YMMV as when I was in Waterloo, I had five co-workers with rental properties. Here in Ottawa, I have yet to find anyone, unless renting a room counts (i.e. one person).

The "DIY buy low, fix, rent for a couple of years and sell for a gain" RE investor can't find anything that is cheap enough or has a chance of being cash flow positive so he is out of the market. He'd be happy to change this, if a bargain comes along.


... not that this is a scientific survey ...


Cheers

[Chris L]

I'm in a university town so everyone has a student rental or wants one because it's the only RE asset with the potential to be cashflow positive. However, most go only semi-full and getting tenants is a lucks game due to a huge surplus of these houses. The quality of tenants is also a crap-shoot. However, people need to live through the experience on their own before they realize it's not for them. It would be an interesting survey to know just how many landlords their are right now versus a few years ago. You'd think it would be tied to home-ownership? At 70% homeownership, how many are left renting? I think it's decoupled from this stat though. As in I think many units are vacant and being subsidized by low interest rates and the owners.

[Lephturn]

I think people underestimate how strong a force is herding in people. They see two overvalued markets (van and TO) and think everywhere else is okay. However, they don't account for how easily sentiment can change on a larger scale in people. Why have prices doubled in almost every single market across the world at the same time? Wide scale herding. Once Canada trends in the other direction, it will happen everywhere, in all markets. North Bay has doubled in price over the last 10 years! Why?

How about this - it hasn't increased in real price at all. The currency has been devalued over 10 years so it has only increased in nominal value but not in terms of purchasing power.

[Berubeland]

Are you in North Bay Chris? I happen to like North Bay as a long term investment because of it's geographic position as a hub of all major Highways going through the north.

The only people who seem to want student rentals are the people who don't have on or haven't had one. I do know one guy who made a fortune renting out rooms to students but...he was there everyday monitoring, fixing and having a real presence there. There's not a management company on earth that can provide that level of service. Most of the people who make money in student rentals are there daily or every other day.

[Sampson]

Forget student housing.

In Calgary we are fortunate in some senses - although finding cash flow positive properties is very rare and largely dependent on rock bottom interest rates.

However, we have an excellent tenant pool. Many young professionals, mid-twenties to mid-thirties whom have decent paying jobs, often expensive hobbies (i.e. spending much of their hard earned cash and saving at relatively low rates), and are on the cusp of home ownership. Many are looking to find a place for 2-5 years, save up some money, then buy a home for themselves.

These are also people who are beginning to settle down and therefore want a place to feel like and call home, and often a very tidy. I posted some of my experiences on a different thread, but even though temptation might arise to buy more real estate, I would have to be more selective of the property and its ability to attract a specific type of excellent tenant pool. If one were ever to rent to students, aim for graduate students. Similar MO as above sample tenant, but no money and sometimes longer term.

[Chris L]

I grew up in North Bay and am currently living in Southern Ontario. North Bay has been stagnant for my entire life although prices are astronomical right now. The tenant pool is atrocious with lots of bad tenants. Things my be different now although my brother owned a rental there 7 years ago and sold out to move up here. I don't see much of a future for the North although who knows. It's an AWESOME place to summer though and possibly retire. It's got great access to plenty of lakes and nature.

Here is the current sentiment, and I think this counts for something: 67% agree with a crash and 33% against. This wasn't so just a while ago. When the mass changes their ideas....

http://www.theglobeandmail.com/globe.../great-debate/

[Eclectic12]

I'm in a university town so everyone has a student rental or wants one because it's the only RE asset with the potential to be cashflow positive. However, most go only semi-full and getting tenants is a lucks game due to a huge surplus of these houses. The quality of tenants is also a crap-shoot. However, people need to live through the experience on their own before they realize it's not for them. It would be an interesting survey to know just how many landlords their are right now versus a few years ago. You'd think it would be tied to home-ownership? At 70% homeownership, how many are left renting? I think it's decoupled from this stat though. As in I think many units are vacant and being subsidized by low interest rates and the owners.

Ahh ... that explains a lot. When I left Waterloo, a lot of new places were being completed in preparation for the double-cohort when grade 13 was retired. I always wondered if that would drive up the vacancy rate about four or five years later when the numbers returned to more of the usual.

The one place I rented in university, the landlords though they'd be in the business for a long time. However, as they had to deal with tenants messes, the quality of tenant going down and their sons refusing to provide cheap labour, at the end of the day, they decided about six years was plenty.

They made out well capital gains-wise as they claimed to have bought for $60K, put some money into converting the dining room, garage and basement into four additional rooms. I believe I saw it listed for $135K and it sold quickly.


Maybe the local landlord's association (if willing) could provide some perspective?


Cheers