# What Would You Do?



## Shakedown (Apr 9, 2011)

The biggest dilemma in my life these days... I've been expecting this correction in real estate for the last 4 or 5 years and it's never come. My life has changed dramatically and now I feel more of a push to purchase a home but I can't shake the feeling that this could be the worst possible time for that. I'm living in a place I'd rather not live, although it doesn't really bother me. I've been able to build $120k to put into a new house with $1200 currently being put away every month to savings. I'm looking at a places in Grimsby, Ontario for around the $330k mark. I have a 7 month old and a really great partner who says she'll be great wherever we end up. 
We will be there for a while but I don't believe the people who say that if you're in it for the long haul, it doesn't matter when you buy. I'm sorry, if I can get a place paid off 5 years earlier, that's pretty major to me, whether or not we'll be there for 30 years after that. 
So what are your opinions? Stick it out for another year and see where the market is while building another $15k? Buy now and don't look back?


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## Potato (Apr 3, 2009)

Congrats on your patience, and using the time and cost savings to actually save! 

All else being equal, if nothing's really shaken your analysis of the housing market, and you still think a correction is coming, then I'd stay the course -- you'd feel pretty dumb seeing it coming, just to lose your patience right at the top and have it turn around on you. Even if it never goes down (the mythical sideways correction), if you're saving more/spending less as a renter and still getting the quality of life you want, then staying the course is the way to go.

That said, if you're in a place you don't want to be, that's no way to live. Is there not another rental you can find that you would like? You may have to get creative, offer to lease some of the houses that are currently for sale only (waste of time most likely, 99% will probably say no... but could be a way to upgrade to a new place if the rental pool isn't there). Commuting always sucks, but there might be more product available in Hamilton/Stoney Creek.

Also, what's the situation like in Grimsby? I'm a massive bear for Toronto, but I don't know if there's been that much speculative excess in the Hamilton suburbs. When the correction does come, how bad will it really be there? What's your current price-to-rent ratio or other valuation metrics? 

(I tried looking myself, but only found one rental listing with a comparable townhouse for sale, and that suggested the multiple was 145X -- at the high end of fair value/breakeven, but nowhere near Toronto's 200+X or even London's slightly rich 170X).

Finally, how mobile do you think you may need to be? Especially for small town living, job loss can sometimes force a move, and renting gives you a lot of freedom. 



> We will be there for a while but I don't believe the people who say that if you're in it for the long haul, it doesn't matter when you buy. I'm sorry, if I can get a place paid off 5 years earlier, that's pretty major to me, whether or not we'll be there for 30 years after that.


+1


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## slacker (Mar 8, 2010)

I'm also bear on real estate in Ontario, but I recognize that the imbalance could last for quite some time (5-10 years possible).


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## dogcom (May 23, 2009)

For a single detached home $330k doesn't sound like it is to high, but maybe Grimsby is in the sticks or something for all I know of Ontario. You might wait for the summer market after the hot spring market passes before you buy if you do so this year.

I think if you are comfortable with your mortgage payments assuming a higher rate of say 5 to 7% with little problem and can also pay the taxes easily enough then getting a good deal in a good area now would by fine. I have friends in Vancouver who have been saving for the last 15 years and can now only afford a cheap town house in a worse area when they could have gotten a house 15 years ago. The most important thing is making a good deal for yourself that is affordable and then never look back. If that is not on the table then wait until it is. On a side note keep some of your powder dry when you buy so you have money for unexpected repairs or appliances break down or whatever.


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## financialnoob (Feb 26, 2011)

I also think there's going to be a correction but it won't be immediate, and could take several years before a buyer could benefit.

If you're really unhappy with your current location, why not move somewhere else? Sure, it's a pain and then there are additional moving costs. But those costs will be nothing compared to the type of money you expect to save if there is a correction in a few years. And it would be an immediate upgrade to the quality of your life, which would help make those next few years go by much easier.

You're currently saving $1,200/month. What if you spent an extra $100-$200 and found a better location? You'd still be saving $12K/year. And though you'd be "losing" money in rent, the extra savings would help reduce the amount of interest you'd pay over the years. Assuming you stay at the new place 3 extra years, the $35K difference could reduce your overall interest payments by around $60K, which helps compensate for the extra rent you paid. Of course that's not a perfect example since most expect interest rates to rise, but at the same time, you and I are predicting a drop in prices as well so that should further help the cause.

Which is all a long way of saying you don't sound convinced now is the best time to buy. Considering this is usually the most expensive purchase in everyone's life, if you're not 100% ready to do it, then don't. You can invest the money in something safe and wait for the right time. But if you're unhappy where you live, I'd suggest moving to a better spot, even if it's only for the short-term.


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## kcowan (Jul 1, 2010)

I agree with the suggestion that you move to a place that you consider acceptable. That will remove or reduce the pressure to buy. I think it will be a long correction (i.e. 7 years) and that it too long to live somewhere that you dislike. Granted the move will cost and your savings rate will drop. But then time will be on your side.


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## HaroldCrump (Jun 10, 2009)

A lot of people are waiting for a RE correction (esp. in Ontario).
And have been waiting since 2005... 
So don't hold your breath.

I don't think there will be any appreciable correction until the bank prime rates get to 6% and above (i.e. double the current rates).


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## OptsyEagle (Nov 29, 2009)

Apart from the fact that you know in your heart that the correction is going to start exactly 1 year after you buy your house, why not get on with it.lol.

Your problem isn't just if and when and from what lever the correction will happen, it is also when will it be over? 

Even if you do get the opportunity to buy a house at some percentage lower, will that number be lower then today's price (prices go higher from here before that time), when will that price be lower (after your child has graduated from university and moved away to the NWT by then) and when will the price correction be over. You will need to call the top (which it sounds like you have ... many times) and call the bottom to be happy.

My advice. Find a house you and your family can be happy with for many, many years and buy it. You are market timing with your families happiness as part of the risk capital. Stop it. You have responsibilities.


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## Shakedown (Apr 9, 2011)

OptsyEagle said:


> You are market timing with your families happiness as part of the risk capital. Stop it. You have responsibilities.


Who do you think you are telling me what makes my family happy? We are happier than anyone I know so please stop being so arrogant.

I'll add some additional info in order to clarify the situation. We aren't currently renting. We are living in a mortgage free 100k home and have 20k in savings. I don't think hamilton burbs will be as prone to a correction, but who knows?


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## dogcom (May 23, 2009)

The only way you can almost know for sure a correction is coming is if you hear about people flipping and bragging about the quick cash. If you hear this kind of thing going on everywhere and everyone is borrowing to flip then I would wait for the destruction to follow. At this time I am not really hearing this kind of thing so who knows when a correction will take place.


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## HaroldCrump (Jun 10, 2009)

dogcom said:


> The only way you can almost know for sure a correction is coming is if you hear about people flipping and bragging about the quick cash. If you hear this kind of thing going on everywhere and everyone is borrowing to flip then I would wait for the destruction to follow.


The process you describe had indeed been happening feverishly here in and around the GTA for the last several years.
I'd say between 2005 and 2009.
By that logic then, we should be within a correction right now.
But prices haven't come down.
In fact, prices are still rising although the insane house flipping has slowed down substantially.


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## Four Pillars (Apr 5, 2009)

The problem with timing real estate is the incredibly long cycles. I bought my first house at the end of 1999, and even then a lot of people thought that "house prices were crazy". Even if you can precisely predict the future, you might end up waiting for the big correction for a significant chunk of your life.

In my opinion, the affordability of the house is the key. If you can buy a house where the costs don't take up too much of your budget, you should be able to easily handle a property crash.

In my case, we're getting close to paying off the mortgage. If the value of the house dropped in half, I don't see how it would affect me at all. Even if I wanted to sell the house and move, odds are that other areas would have suffered a similar drop. Note that there are sometimes exaggerated local crashes (ie Detroit).


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## financialnoob (Feb 26, 2011)

Shakedown said:


> Who do you think you are telling me what makes my family happy? We are happier than anyone I know so please stop being so arrogant.
> 
> I'll add some additional info in order to clarify the situation. We aren't currently renting. We are living in a mortgage free 100k home and have 20k in savings. I don't think hamilton burbs will be as prone to a correction, but who knows?


Down boy. Optsy was just pointing out that the unhappiness should factor into the equation just as much as the downpayment. I thought it was a point worth considering, and certainly not out of line. You're asking for advice, don't jump down someone's throat for giving it to you.

As for the rest of the details, if you're not paying rent and you're mortgage-free, that's great. You said you were unhappy with where you lived. Does that mean Hamilton as a whole, or just the neighbourhood you're in? What exactly makes you unhappy about it? That should also be factored into the equation, as well as what about Grimsby is attractive to you, and what the difference in cost would be.


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## Berubeland (Sep 6, 2009)

My advice is the following. If you are a buyer, spread the word about what you want and wait for a buying opportunity. These come along through a friend of a friend when people want to sell quickly and so on. 

Just last week an investor called me, she paid 215,000 for her condo and has lived there several years. The condo on the market range in price from $235,000 to $255,000. One gentleman in her building had his wife pass away and is waiting to get into a retirement home. He wants to sell fast, can't be bothered with real estate agents and showings. He offered it to her for $175,000... $40K less than what she paid. Then he wants to rent it back for above market rent $1500/mo until he has a spot...

She asked me what I thought about it. How can you say no? 

So look around for something like that. Those deals exist especially if you look for them.


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## dogcom (May 23, 2009)

Haroldcrump out west here the market is very hot and people are very scared of it. I don't know to many people who are thinking flip. During previous hot markets people thought of buying and selling without a care in the world.

Overall I am with four pillars on this one. Buy what you can afford get a good deal like berubeland said and then go for it. I also don't know to many people who didn't think they may have paid to much and were afraid the market may drop in the first year or so of owning a home.

I will also be in a mortgage free position in 2 months like four pillars and I also don't care anymore how much the price drops. In fact my home sold for 38k less then I asked for it. But I didn't care because my conditions to buy a bigger newer house in the same area I am now with a yard and be mortgage free was achieved.


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## OptsyEagle (Nov 29, 2009)

_What Would You Do? _

OK, you are doing everything right. Good luck with that.


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## dogcom (May 23, 2009)

Shakedown I somehow overlooked your comments against opstyeagle.

What he said may seem a little harsh but it was a fair comment from what you opened the thread with. These same comments also work with the stock market as well. We may not want to hear it but it can shake us up a little and make us think about it.


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## sprocket1200 (Aug 21, 2009)

most people think a correction needs to be a severe drop in pricing. a period of slow or no growth is also a correction. if your savings are out pacing the returns on RE (which they should have easily the last couple of years), then keep saving. you will be doing relatively better, have a higher down payment, and more flexibility later...


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## Shakedown (Apr 9, 2011)

I appreciate everyone's comments. OpstyEagle, thank you for pointing out that by staying here for a year I am being irresponsible to my family. 

To further clarify I never said I or we are unhappy living where we are; in fact we are quite happy living here, we would just rather live somewhere that is more suitable to raising a family. The 'unhappiness factor is a non-issue'. The area we are now won't really become a hindrance to my family's development for another year and a half, if not longer IMO.


Shakedown said:


> I'm living in a place I'd rather not live, although it doesn't really bother me.


Berubeland, your suggestion is a great one. This is exactly the path we are going to take. Having time and flexibility on our side can be quite beneficial in real estate.


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## marina628 (Dec 14, 2010)

Call me crazy but you are mortgage free and saving $1200 a month so that would indicate you are comfortable with a $1200 mortgage payment if all other factors like Utilities ,taxes etc stay the same as they are now.
I think maybe going from a $100,000 house to a $330,000 house may be a bit of a stretch for you.


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## OptsyEagle (Nov 29, 2009)

Shakedown said:


> I appreciate everyone's comments. OpstyEagle, thank you for pointing out that by staying here for a year I am being irresponsible to my family.
> 
> To further clarify I never said I or we are unhappy living where we are; in fact we are quite happy living here, we would just rather live somewhere that is more suitable to raising a family.


No problem, don't mention it.

Look, I didn't mean to say you are being irresponsible (I think I might of, so I appologize), you are obviously trying to save your family thousands of dollars and that in itself could make everyone a lot happier.

That being said, you say you are not unhappy but then go on to say you would rather live somewhere else, so lets just agree that everyone could be "happier" if they moved into this new house.

So my main point is, even if you do pull this market timing thing off, which I doubt you will, you could be postponing that happier life for quite a long time. Is it worth it? Only you and your family can decide. Good luck.


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## sprocket1200 (Aug 21, 2009)

OptsyEagle said:


> No problem, don't mention it.
> 
> Look, I didn't mean to say you are being irresponsible (I think I might of, so I appologize), you are obviously trying to save your family thousands of dollars and that in itself could make everyone a lot happier.
> 
> ...


I totally agree with Optsy. it is a house, not an investment. who cares what the value is...


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## Shakedown (Apr 9, 2011)

It's also a liability until you have closed your mortgage.

I understand and have digested all the relevant comments in this thread. Thanks for your thoughts. I'm staying the course for now- if it ain't broke, don't fix it. In the meantime, I'm keeping my eyes open for a deal and ameliorating my options.


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## Cal (Jun 17, 2009)

Yeah, when it is time, you will know, and be 100% comfortable with your decision. Until then, wait.

You are lucky to have such an understanding spouse. Don't forget to tell them that.


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## sprocket1200 (Aug 21, 2009)

Shakedown said:


> It's also a liability until you have closed your mortgage.
> 
> I understand and have digested all the relevant comments in this thread. Thanks for your thoughts. I'm staying the course for now- if it ain't broke, don't fix it. In the meantime, I'm keeping my eyes open for a deal and ameliorating my options.


actually, from a liability stand point, it remains such forever...


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## I'm Howard (Oct 13, 2010)

If it ain't broke, Break It, a rut is a coffin with the ends kicked out.
The only person who likes change is a baby.


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## kubatron (Jan 17, 2011)

I can't get over the first sentence of your post, I'm sorry.

"I've been waiting for this correction for 4 or 5 years".

Wow.


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## Sustainable PF (Nov 5, 2010)

kubatron said:


> I can't get over the first sentence of your post, I'm sorry.
> 
> "I've been waiting for this correction for 4 or 5 years".
> 
> Wow.


Agreed. If we can't time the stock market I don't see people being able to time the RE market. Gotta live your life in a way that makes you comfortable. If you are risk adverse perhaps the current plan works. It will take a crash, not just a correction, for prices to drop back to 2005 levels.


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## HaroldCrump (Jun 10, 2009)

Sustainable PF said:


> It will take a crash, not just a correction, for prices to drop back to 2005 levels.


Agreed.
Just going by the simple principles of demand and supply, when there are more buyers, the price rises. When there are more sellers, prices fall.

Right now, there are more buyers relative to sellers + new inventory.

The only way prices would go down substantially is if the number of buyers go down substantially and/or number of sellers + new inventory increases substantially.

So, let's reason further : what is the cause of so many buyers?
Two most likely reasons are : low interest rates, attractive buying terms (long amortization, cash backs, etc.) and a growing economy, supposed to be the best in the G8.

Therefore, for you to believe in a significant price correction, you _must_ also believe in a significant increase in interest rates and/or an upcoming recession.
Do you?
If not, where do you expect the RE correction to come from?

And that is the reason you (and other folks) have been waiting hopelessly since 2005.
_There is no immediate catalyst for a reduction in the number of buyers._

If you are waiting for the central bank to raise rates significantly (i.e. bank prime at 6%)....one, it's not gonna happen immediately and two, many people have already switched to 5 year fixed rates.

The govt. knows this and will do whatever pressure tactics are required to make the central bank not raise rates too aggressively.

In other words, I personally do not see any reason or catalyst for a residential home market price correction, so don't hold your breath.
I will grant, though, that the Vancouver market may experience a mini-correction, but not great.

However, I'm not a RE market analyst by any standards, so don't take my word for it...I'm just trying to think about it logically.


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## Four Pillars (Apr 5, 2009)

Great comment Harold.

It was a bit before my time, but does anyone know what (if anything) started the early 90s housing crash in Toronto? 

I've read there was a lot of speculation - ie most new condo units were being sold to investors, rather than people who were going to live there.


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## HaroldCrump (Jun 10, 2009)

Four Pillars said:


> It was a bit before my time, but does anyone know what (if anything) started the early 90s housing crash in Toronto?
> 
> I've read there was a lot of speculation - ie most new condo units were being sold to investors, rather than people who were going to live there.


Before my time, too, but I've heard from my parents, uncles, etc. that it was primarily oversupply.
Back in those days, RE builders didn't need to pre-sell most of their units (condos or houses) before starting building.
Similar to how it was, and still is, in the US.

In the US today, most people buying new homes are actually buying pre-built, but not lived in, homes.
You may decide to buy a new home at 9:00 am and by 5:00 pm you are ready to move in (not quite, but you get the idea).

Whereas here, you need to put a deposit down and wait for 1.5 - 2 years while your home is constructed.

As a result of the 90s crash, this was one of the things that was changed.
Builders now need to pre-sell most of their inventory before they start building.
This background is specific to Ontario, not sure how it was in the other provinces back in those days...I was still a kid in school in the 90s


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## I'm Howard (Oct 13, 2010)

There is No Real Esate Market, but there are Real Estate Markets.

Condos in Downtown TO will take a hit when rates go up, oversupply, many held by 5% down, many held by investors needing cash flow from renters to keep them.

Areas like Oshawa will take a hit, higher end areas in TO will not be affected.

Rates will go up, possibly dramaticaly, so the best position is to keep your finances intact until the market clearly shows you what it is going to do.

The message will be telegraphed, it won't be BOOM, but you will get signals, then you plan accordingly.

RE will not move up , so just sit and wait and keep building that down payment.

One thing is clear, your savings will earn more interest in the future than they are earning now.


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## Potato (Apr 3, 2009)

HaroldCrump said:


> Just going by the simple principles of demand and supply, when there are more buyers, the price rises. When there are more sellers, prices fall.
> 
> Right now, there are more buyers relative to sellers + new inventory.
> 
> The only way prices would go down substantially is if the number of buyers go down substantially and/or number of sellers + new inventory increases substantially.


I might quibble a tiny bit, but this part is ok.



> Therefore, for you to believe in a significant price correction, you must also believe in a significant increase in interest rates and/or an upcoming recession.


But you've made a bad logical leap there.

There are _lots _of ways for supply to increase or demand to decrease without requiring interest rates to significantly increase or for a recession to hit. Heck, that should be obvious after the US meltdown without either of those factors (the housing bust caused the recession, not the reverse; adjustable rates went up ~1.8% from 2003->2007, five-year rates went up <1%).

Some ways:
Demand-side:

-Speculation exhaustion. Some non-trivial part of the demand is from speculators (and I'd love to find good data on just how big that part is). Will they keep buying if it stops going up? 

-Future demand once again becomes future demand. Similar to the first point, some portion of buyers are rushing to buy earlier in their lives because of fear or greed after witnessing prices increase so much for so long. Or simply due to changing tastes.

-Limiting leverage: two attempts to very slightly take in the terms for getting a mortgage have already happened. Will there be more to come?

-Housing budgets get squeezed by inflation in other areas (food, energy, tuition, etc) of the household budget.

Supply side:

-Demographics. If aging baby boomers want to sell/downsize, that could increase the supply side.

-Similar to the first point under demand, if speculators decide to dump their inventory, that opens a lot of demand.

-New building. The new laws after the 89 crash in Toronto help a bit, but doesn't prevent over-building. We've been building one new unit for every 2.2 new people for the last 5 years running (CMHC reports average GTA household size as 2.8 people). 

-Changing tastes: if it was simply changing tastes that lead to the increase in the homeowner rate, then if that trend reverses, supply could come back to the market.

Now, none of those provide for easy-to-identify near-term catalysts, which is part of why housing bears like myself have to be patient. But IMHO one of the biggest factors is speculation, and one of the most dangerous. It's _also _affected by interest rates, and it's a positive feedback mechanism.


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## kubatron (Jan 17, 2011)

some great commentary in here. OP crap or get off the pot. You're looking for a place to raise a family. That should be first and foremost important. Who cares if it takes you 2-5 years longer if that place makes your family happy and stable and safe and a great place to live? Just get on with it already. Obviously your "timing the market" or waiting for a crash has failed completely utterly and miserably (no in terms of savings but in terms of low rates, and rising prices).


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## andrewf (Mar 1, 2010)

I think a few years of stable prices might hurt demand, too. A lot of the impetus for speculators to join the market is the recent history of rising prices. Rents don't typically cover the carry cost of most units, so without strong price appreciation, the case for speculation becomes weaker. If prices are flat, new speculators will have less incentive to enter the market. Existing speculators may try to cash in the gains so far. If prices slip, people may head for the exits.


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## andrewf (Mar 1, 2010)

kubatron said:


> some great commentary in here. OP crap or get off the pot. You're looking for a place to raise a family. That should be first and foremost important. Who cares if it takes you 2-5 years longer if that place makes your family happy and stable and safe and a great place to live? Just get on with it already. Obviously your "timing the market" or waiting for a crash has failed completely utterly and miserably (no in terms of savings but in terms of low rates, and rising prices).


If you can rent a suitable home for your family for less or about the same as the carrying cost (mortgage interest+maintenance+taxes+insurance) of buying a home, feel free to rent.


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## ChrisR (Jul 13, 2009)

sprocket1200 said:


> I totally agree with Optsy. it is a house, not an investment. who cares what the value is...


I find this comment interesting because I usually put less effort into timing my investments than I do timing my other purchases.

For example, I don't time my stock purchases at all. I buy stocks when I have the money, and pay very little attention to what the price is at the time.

On the other hand, I would never buy a pair of snow tires in the fall, a bathing suit in the spring, or asparagus in the winter... because I know that I'll probably get a better deal at another time of year!

So how does this apply to residential real-estate? I'm in the same position as the TS. I want to buy a home, but I can't stomach the thought of buying into a market at its peak. I don't look at a home as an investment at all, but rather as a luxury item. I don't need it, and it will never make me any money, but I have more money than I spend and I'd like to live better.


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## ChrisR (Jul 13, 2009)

HaroldCrump said:


> Whereas here, you need to put a deposit down and wait for 1.5 - 2 years while your home is constructed.


I find this to be the most confusing thing about the new condo market!

I simply can't understand how anyone other than retirees, near retirees and speculators would decide to lay down money for a condo that they won't occupy for 2 years.

Because it's the only way to get a foot into the real estate market? Why not buy an older condo? Are people "upgrading" from older condos to newer ones? Maybe in Toronto or Vancouver, but I have a hard time believing that is the case in smaller markets (where many young condo dwellers are waiting to upgrade into houses).

Where I live, in Winnipeg, virtually every new condo development is sold out 15 minutes after they plunk a sales trailer down on the property. In the suburbs! Right next to brand new detached homes as far as the eye can see! Who the hell is buying them?


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## dogcom (May 23, 2009)

Vancouver in the early 80's, Toronto in the late 80's to early 90's and the US in 2006 all had the same things in common. Remember all those flip this house shows in the US that was a good clue. Also Toronto and Vancouver were filled with flipping as well so speculators were everywhere. Bragging was heard everywhere and there was no fear. Borrow like a bandit and banks having no problem lending it was also common during those times. Finally interest rates being raised to cause a recession was what would ultimately bring down the house of cards. 

What do we see today? 
In Vancouver house prices are to high and borrowing is up but a lot of the money is coming from Asia and not being borrowed. Asian investment dries up and interest rise up enough a sizable correction is indeed very possible. Other then that there is really a lot of fear of the high prices so I haven't really heard the bragging and possibly the only speculation appearing would be in Condo's. As for Toronto I am unsure if it fits the criteria I mentioned above so maybe someone could explain what it is like there.

On a side not there is two different markets in Vancouver. In greater Vancouver prices are rising and the poorer people are being driven east in greater and greater numbers. So what I have heard is there are foreclosures out in Mission which is over an hour east of Vancouver as people buy far away and can't pay the car mortgage because they have little left over after mortgage payments and so on. Cars are very expensive and are really a mortgage on their own when you get around to paying all the costs. Most people for some reason can't see this terrible cost and just get into a house they can afford.


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## I'm Howard (Oct 13, 2010)

I have advised my Son to wait until rates start up, maybe end of 2012, then take his time and look.

Mid 30's, He and his Lady Friend have a six figure downpayment, they are unbelievable savers who do not drink or smoke but do take one big vacation a year.

Do not be lulled by the Siren Song of owning, Renting allows you the security of cash if a crisis happens, flexibility to move if the new neighbours are jerks, and peace of mind if the basement floods, call the landlord.

I would love to sell and rent, but losing battle, so we stay.


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## dogcom (May 23, 2009)

If one has almost paid off their mortgage and is happy where they live then I think it is a better strategy to not rent. You have worked so hard to pay the thing off so why risk rising prices even if you think the market is high and then have to pay rent which is like paying a mortgage again.


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## Berubeland (Sep 6, 2009)

All year long we have been getting warning signals that the Real Estate Market is overpriced.

Bank of Canada grumbling about interest rates

Reports from the banks about their concerns...

Upping the requirements for mortgages...

Upping the amount that investors have to put down

The scary report about the indebtedness of Canadians

Now the media is starting to report this.

The only thing that needs to change is public sentiment. Then you won't be able to give a house away. 

OP I can assure you that you are not the only one who feels this way and the urgency you feel is the beginning of the end for this real estate market. 

All over Toronto landlords are providing subsidized accommodation for tenants.

Condo vacancy rates for rentals are 5% and higher for luxury condos. Yet my view from 600 Fleet Street the other day showed no less than 11 sky cranes. The dip in the stock market pushed many into real estate and they bought a lot of condos they are doomed to lose money on month after month. 

Plus I rent to many people who have sold their homes. One couple just tonight. 

Smart landlords can't find anything to buy because prices are so far out of reality because real estate investment is such a sure deal. 

Two professionals working full time can't afford to buy a house anymore. Who's going to buy them? 

Who else has noticed that we have bear threads and new buyer threads where people are buying with very little money and dreadfully overextended. 

Your duty is to keep your family safe from harm including financial harm such as would be caused by buying and overpriced home and mortgaging the next 30 years of your life when you really don't have to. 

Everyone here blah blahing about timing the market is full of it. This is the biggest purchase you'll likely make in your lifetime, take as much time as you need. 

How many of these real estate pushers have made several hundreds of thousands in their home equity already... do you think for one second they'd be saying such nonsense if they'd lost a couple hundred thousand instead of making it? Kubatron is a mortgage broker for crying out loud. He thinks he's a hero because house prices have been going up for the last 20 years. 

I'm not sure about you but I have an amount in my mind about what price is a reasonable amount to pay for just about everything. For example, I like to spend about $10 on a tshirt. If it's $20 I just don't buy it. I wait for it to go on sale. If it doesn't go on sale I don't need one for $20.

Same as this house I live in, I paid $156,000 for it 13 years ago. Now it's worth $380,000 would I pay that for it now. No way! Not worth it too much

Right behind my house they sold 76 townhouses some of which already leak because they were built in a swamp. People paid over $400,000 for a house that leaks and will always leak forever because it's a house not a boat. 

So kudos to you OP for not going along with your buddy at the watercooler who thinks you should buy Enron... or Bre-X or real estate in 2011.


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## dogcom (May 23, 2009)

I agree with your analysis berubeland all fingers point to down and correction. Also paying far to much with a very high mortgage you can barely afford makes it worthwhile to wait. 

If however you can afford it then you can't be certain you will see a decent correction. In Richmond BC last year a home went for a staggering $750,000 which is way to much and correction is certain and the news papers even reported that. Well fast forward to Feb. of 2011 and that house would cost you between 1 million to 1.2 million dollars. I have also talked to countless people over the last 5-10 years who have cashed in or waited thinking they could wait for a correction only to have put themselves permanently out of the market.

I have even heard a story this week where a rich Asian went to one of the most expensive and top locations in Vancouver and bought like 7 properties. Also hearing all this bearish sentiment makes you wonder how much of a correction we will really get. Interest rates need to spike to be certain of a decent correction in most parts of Canada.


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## Four Pillars (Apr 5, 2009)

Four Pillars said:


> Great comment Harold.
> 
> It was a bit before my time, but does anyone know what (if anything) started the early 90s housing crash in Toronto?
> 
> I've read there was a lot of speculation - ie most new condo units were being sold to investors, rather than people who were going to live there.


Just read Carrick's latest article - 

http://www.theglobeandmail.com/glob...ud-knocking-is-falling-prices/article1998280/

He mentioned the following stat which is sort of relevant to my question:


> For an actual real life example of how real estate prices can fall, let’s look at what happened in Toronto between April, 1989, and February, 1996. According to Mr. Dunning’s numbers, the average resale home price in the city fell to $192,406 from $280,121, or 31 per cent.
> 
> That was an extreme plunge, fuelled in part by a level of rampant speculation that we aren’t seeing in today’s market.


Hmmm....I quoted myself. I hope Royal is ok with that.


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## Lootgrabber (May 17, 2011)

Interests rates are low right now. The rates might go lower, they might go higher, you are not in control of these things. This housing correction you speak of may or may not also happen, again you are not in control of these things.

The correction you speak of i don't think is going to be a massive plunge in property value, but maybe a a smaller growth property increase in comparison to what we have seen in the past 10 years.

You are in control of finding a home, that you like. You are in control of negotiating or finding a deal on a home. Because you ask so bluntly 'what would you do'. Me personally if I were in your situation i would take advantage of the low interests rates and purchase a home that i would be happy living in for the next i dunno 10+ years. Knowing that with 120k down on a 330k home i can survive a 1/3 depreciation of my home (which is highly unlikely) and still come out on top down the road if it were to happen. 

If you want to gamble, because that looks like what you are doing, go to the casino . If you want to borrow money for a new home now looks like a pretty good time .


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## hboy43 (May 10, 2009)

Berubeland said:


> All year long we have been getting warning signals that the Real Estate Market is overpriced.
> 
> So kudos to you OP for not going along with your buddy at the watercooler who thinks you should buy Enron... or Bre-X or real estate in 2011.


I like your thinking. The only flaw is the difference between what SHOULD happen and what DOES happen. Your summary is as far as we mere mortals can take things.

Personally, I don't like owning RE. Been an owner for almost 26 years now. Recently sold house #1, held for 25 years, for a grand total CAGR of wait for it ... 2.9% in a time interval where inflation was something like 2%. Made all the money in the last 7-10 years, the first 15-18 were a financial waste land. Many, many easier ways to make money.

The average person, however needs to own because the average person needs a forced savings plan, aka paying a mortgage. The non-average should think long and hard about being a renter. It is my fondest hope to never sell nor buy another piece of RE again. Take me out horizontally please.

hboy43


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## Karen (Jul 24, 2010)

> Quote from Harold: In other words, I personally do not see any reason or catalyst for a residential home market price correction, so don't hold your breath.
> I will grant, though, that the Vancouver market may experience a mini-correction, but not great.


It has happened in the past, though, Harold. In 1978 I bought a house in Coquitlam (a suburb of Vancouver) for about $170,000. Two years later, in 1980, the value had dropped by about $50,000 to $120,000. That's nearly a 30% drop - pretty significant. I agree that a decrease of that magnitude is very rare, though.


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## tombiosis (Dec 18, 2010)

I don't think you should count Vancouver in your analysis...its a different situation out there, with many wealthy Asians buying everywhere.
If I were you, I would wait it out. If you find something you just must have, onlu opffer what you think is fair. There will come a day, soon I think, when there will be way more sellers that buyers, and some sellers will accept whatever they can get to get out of their situations...
stay the course...the great deals are just around the corner.


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