# On the housing market...



## Siwash

And with deflation looming (even Poloz is saying it), the scales are tipping more and more in favour of a sizeable correction…

http://www.theglobeandmail.com/repo...the-world-deutsche-bank-says/article15878166/

Well, cash is king I guess.. if this happens I will be very thankful for liquidating… sold condo in the spring and happily renting… with zero wage increases in this country (when you factor in measly inflation), house price appreciations make NO sense at all… and too many people aren't willing to admit this in this country b/c 70% of you own real estate… (well, sort of own… the banks owns it and you rent from the bank


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## Jon_Snow

I'm torn on this... on one hand I love the fact that I have over 300k in equity in a 900 sq ft condo, ridiculous as this seems. But if there was a sizeable housing correction, I wouldn't mind moving up into a townhome or a bungalow. If the correction was severe enough, I could probably buy my "move-up" home with cash if we wanted.

At least I am in a position, no matter what happens, to benefit in one form or another... though I know a lot of people in my own circles who would be crushed utterly if housing tanked.


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## Just a Guy

I tend to never count on the "value" of my real estate until I sell it and know the true value. I count it's worth based on the cash flow it produces. I've thought real estate has been overvalued for years, but it hasn't stopped me from buying. The difference is finding something of value to buy. I'm glad to have cashed out on my high priced stuff with low ROI and convert it to low cost, high cash flow properties. Even if there is a correction, most of the things I bought came in at less than 50% of current values.

Jon_Snow, I think you may wake up one day and find your 900 sq. ft. condo is worth less than $100k. I'd sell at the peak and rent a while, pick it up again at half price or less in a few years…but then I've been waiting for the bubble to burst for several years now…If they raise interest rates though, the market will start to tank when mortgage renewals come up. The feds have been threatening to do this for years, but haven't…probably the only thing keeping the bubble intact.


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## Jon_Snow

My wife has let me know several times she NEVER wants to rent again. Fair enough. I'm soon to leave full time work and live on dividends and her salary, which is considerably higher than mine ever was. Happy wife, happy life, so they say...

No renting for us!!!! :tongue-new:


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## Siwash

Just a Guy said:


> I tend to never count on the "value" of my real estate until I sell it and know the true value. I count it's worth based on the cash flow it produces. I've thought real estate has been overvalued for years, but it hasn't stopped me from buying. The difference is finding something of value to buy. I'm glad to have cashed out on my high priced stuff with low ROI and convert it to low cost, high cash flow properties. Even if there is a correction, most of the things I bought came in at less than 50% of current values.
> 
> Jon_Snow, I think you may wake up one day and find your 900 sq. ft. condo is worth less than $100k. I'd sell at the peak and rent a while, pick it up again at half price or less in a few years…but then I've been waiting for the bubble to burst for several years now…If they raise interest rates though, the market will start to tank when mortgage renewals come up. The feds have been threatening to do this for years, but haven't…probably the only thing keeping the bubble intact.


"probably the only thing keeping the bubble intact." 

Not exactly a healthy sounding scenario…

to Jon_Snow, i'd sell and rent..

Here's more:

http://www.bnn.ca/News/2013/12/9/Should-you-be-worried-about-Canadas-housing-market.aspx


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## none

I posted on another blog asking what a 'soft landing' scenerio would actually look like. To me a soft landing sounded pretty darn bad as well.


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## sags

Mr. Poloz didn't sound too happy in his interview in Montreal today.

Whiffs of deflation.........with the GDP scraping along the 0% line.

Heavily indebted Canadians.

Home construction and real estate a big economic sector.

All things touched on today.........in a central banker's manner of saying something.......without saying something.

As the rest of the world looks on in amazement.........and predict a big burst in our housing bubble..........Canadians go on their merry way.

Maybe we are special..........I think we are. 

But we probably can't hope to be "different" as well. That would be expecting too much.

Unless virtually everyone outside Canada looking in...........is dead wrong, we are going to have a major correction in housing prices.

A correction of between 25-40%........they are predicting.


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## HaroldCrump

Siwash said:


> And with deflation looming (even Poloz is saying it)


There is no deflation.


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## Janus

sags: I certainly hope so. At these prices I think it's ridiculous for anyone to buy a house.


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## the-royal-mail

Jon, I am not sure where you get the idea that you will "move up" if there is some sort of pricing correction. The correction would also affect the price of your present house. If your goal is to move up and benefit from this alleged correction, you should sell your place right now before that happens, then rent someplace until the alleged correction, then buy your upgrade when the masses are flooding the market with their houses like yours in a futile attempt to cash in. Otherwise you'll suffer the same drop as everyone else.

It's very much a two way street.


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## Janus

the-royal-mail said:


> Jon, I am not sure where you get the idea that you will "move up" if there is some sort of pricing correction. The correction would also affect the price of your present house. If your goal is to move up and benefit from this alleged correction, you should sell your place right now before that happens, then rent someplace until the alleged correction, then buy your upgrade when the masses are flooding the market with their houses like yours in a futile attempt to cash in. Otherwise you'll suffer the same drop as everyone else.


I was thinking the same thing. I've never understand why people think they're in a better position to buy a new house simply because theirs has increased in value.


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## MoneyGal

Janus said:


> I was thinking the same thing, well said.


You'd take the "loss" on the current property (not actually a loss depending on your purchase price depending on your downpayment, interest rate and repayment schedule - just a loss of phantom equity: phantom as in ephemeral) then buy a larger/more upgraded house for less than you would currently spend for the same property. 

"Moving up" can mean different things than "spending more." And a drop in phantom equity affects different people differently. I paid $200K [face price, not all-in costs] for my house, which would sell for $500K now. If there was a housing correction and I sold my (paid-off) house for $350K instead of $500K but was now able to "move up" (defined in my terms; let's say fancier countertops and more bathrooms) to a house for $400K, using the $150K gain on my existing house, where's the (actual) loss? How have I suffered from the drop?


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## DayTek

My husband and I bought our semi-detached in 2006 (built new) for $184,000. Interest rate at the time was 6.3% (we got a discounted rate of 5.3%). After watching the prime rate plummet, we took an early renewal in 2010 and went with a variable rate, with a rate-capper of 4.75%. It has sat at 3% since we renewed and all we have done is chopped away at the mortgage, taking advantage of the dirt-cheap interest. When it comes time to renew in 2015, we'll likely avoid variable and lock-in.

Based on what houses similar to ours have sold for in our area, our home value has gone up *20%* in 7 years! It would be nice to sell and upgrade, but a rate increase is looming and prices have gotten just plain _stupid_. We may never move and just enjoy being mortgage-free before 40  I feel so bad for first-time home buyers today - Their wages have not increased much since we bought our home and good luck trying to buy anything new for under $250,000 in our area.

I'm in banking. All a low prime rate has done is allow people to become apathetic and even ignorant to their debt. All they want to know is what the minimum payment is and how big a mortgage they can be approved for to buy their "dream home". If inevitable mortgage rate increases don't cause the masses to be screwed, the rise in interest on their credit lines they've maxed out will. It will be interesting to see how the BoC handles raising prime. I'm predicting 'turtle-slow' for any sort of non-disaster outcome.

All I can say is good luck "Average Canadian with $27,000 in consumer debt, not including mortgages".


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## Jon_Snow

Of course I realize the price of our condo would be hammered in a housing correction. Let's say there was a 50% correction, our condo would be worth 150k or less.... well, we would probably just rent it out. Nice little bungalows in our neighbourhood go for around 700k, so let's say they are now 350k... with our cash savings and the liquidation of a few investments, we could buy it outright.

A housing correction would mean we could "move up" with much less money out of our pockets.


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## Just a Guy

Aren't you kind of assuming that a housing correction isn't going to pull down all your other investments as well?

There is usually a domino effect...unless your other investments are all in cash...


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## Just a Guy

MoneyGal said:


> You'd take the "loss" on the current property (not actually a loss depending on your purchase price depending on your downpayment, interest rate and repayment schedule - just a loss of phantom equity: phantom as in ephemeral) then buy a larger/more upgraded house for less than you would currently spend for the same property.
> 
> "Moving up" can mean different things than "spending more." And a drop in phantom equity affects different people differently. I paid $200K [face price, not all-in costs] for my house, which would sell for $500K now. If there was a housing correction and I sold my (paid-off) house for $350K instead of $500K but was now able to "move up" (defined in my terms; let's say fancier countertops and more bathrooms) to a house for $400K, using the $150K gain on my existing house, where's the (actual) loss? How have I suffered from the drop?


Well, had you sold at 500k, and rented, I see a pretty obvious actual loss...

When it comes to personal property, most people don't factor in the real costs anyway. When you add in the interest you pay, the upgrades you make, etc. most people lose their shirts on the "profits" they think they made...


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## MoneyGal

Just a Guy said:


> Well, had you sold at 500k, and rented, I see a pretty obvious actual loss...
> 
> When it comes to personal property, most people don't factor in the real costs anyway. When you add in the interest you pay, the upgrades you make, etc. most people lose their shirts on the "profits" they think they made...


I shouldn't type using examples on the fly.  Jon made the comment I should have made a few posts ago.


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## Jon_Snow

Just a Guy said:


> Aren't you kind of assuming that a housing correction isn't going to pull down all your other investments as well?
> 
> There is usually a domino effect...unless your other investments are all in cash...


I doubt the majority of the financial world even notice a Canadian housing crash... The US and Europe have had theirs....
No doubt the TSX would suffer, but that's why we diversify. And yes I hold a lot of cash.


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## MoneyGal

Correlation of stock markets and housing markets: generally housing is thought to trail stock markets. Current valuations of housing stock is related to factors other than equity markets (principally low interest rates driving up demand and providing "more house" in reach of more consumers). Thus a "crash" in housing prices would not necessarily lead to dips in equity markets: the correlation goes one way, not the other.


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## emperor

It's pretty well known that the average house should be 3X average family net income which would mean the average home price should be around 260 not 380. The BoC and CMHC increased the prices beyond what they should be. They know the standards but play with peoples lives. I have another good idea government, at your casinos you should give everyone a 200K tab for free. I mean your not forcing them to use it so there is nothing wrong, you're just taking their dreams and using it against them to financially ruin them, no biggy.


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## the-royal-mail

^ Great post. Add to that that a lot of people are paying more than 380 for their houses. Think of all the absurd $640K pricetag houses we've heard about in places like GTA and Vancouver. You're absolutely right, that's why I'm not falling for this trap and will continue to rent. No need to pay 5-6% in various fees when I move either.


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## NotMe

Another day, another crystal ball prediction.

What's interesting is the notion that a housing crash is both widespread across both property class, and property location.

In other words, the examples above about your condo falling in value 50% also suggest that the 'move up property' (detached single family home) also falls in value 50%. And that this move up property is in the same geographically centered location (ie Toronto proper) as the condo. 

To me it seems far more likely that while a housing correction may occur (keep in mind, I've been thinking this literally since May 1, 2002, when I closed on my first condo) it may affect condos about 40% and SFH by 10%, and in some areas, by 0%. I just don't think you're going to get a $1.5M Rosedale mansion for $750,000 - ever. Ever. EVER. You may be able to do that for a condo in CityPlace, mind you. Or a SFH home in Pickering or Ajax or Brampton or some other far flung home. But places where people have wanted to live at least the last 60 years and have full grown trees? Much more doubtful to me anyway. Even during the correction of 2008, I still remember seeing houses in my nice but not tony area of Toronto (Don Mills/Lawrence) sell pretty quickly at full ask. YMMV.

It's just very hard to predict the market, so I prefer to predict my timing. MY wife and I bought a house when we had a son, and renting costs were about $3,000 for a full house (not a floor). I believe trying to time the market is very hard, hats off to those who do it. If I sold our house on a belief that the housing market will correct, and try to 'buy back in' once this housing market correction hits, I think that's a big risky move. Basically, if the correction was less than 50% or took longer than 1 year, my divorce attorney would eat up all my savings.

We'll see. So far my usual response has proven correct: Yes, I believe a housing correction should have occured by now. But it hasn't. So the future is hard to predict - and that doesn't always get sounded out loud enough. Richard Feynman, the physicist, said "It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with the experiment, it's wrong."

So far, it's been a long 11 years of no housing correction. Doesn't mean there will never be one or trees grow to the sky. Does mean that I hope the OP comes back in December 2014 either to gloat or admit he was wrong.


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## bgc_fan

Jon_Snow said:


> Of course I realize the price of our condo would be hammered in a housing correction. Let's say there was a 50% correction, our condo would be worth 150k or less.... well, we would probably just rent it out. Nice little bungalows in our neighbourhood go for around 700k, so let's say they are now 350k... with our cash savings and the liquidation of a few investments, we could buy it outright.
> 
> A housing correction would mean we could "move up" with much less money out of our pockets.


I think the problem with this thinking is assuming that the condo market is equivalent to the housing market. Given a larger increase in supply of condos compared to single family homes, I doubt that you would see the drop as bad for single family homes.

Let's put it this way. In my area there are condos that are being sold for slightly less than equivalently sized single detached homes (if you can find them). There are a lot of units available, but few homes. If there is a crash, which do you think would be more valuable? A single family house that you can own, or a condo where you will be stuck with condo fees and not really own in any real sense?


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## MoneyGal

NotMe said:


> We'll see. So far my usual response has proven correct: Yes, I believe a housing correction should have occured by now. But it hasn't. So the future is hard to predict - and that doesn't always get sounded out loud enough. Richard Feynman, the physicist, said "It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with the experiment, it's wrong."


I was at an investing conference with Gene Fama and someone challenged him on the model he was presenting. His response was "I know it's wrong. It has to be wrong, _because it is a model_; it isn't real."


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## none

A problem with cashing out of the housing market to wait for a correction is that it costs A LOT to buy/sell a house. At least in BC a rough figure on a 600K house would be about 50K. Land transfer tax, lawyer fees etc for buying plus realtor fees when selling.

The market would have to correct by >10% just to break even. This may happen but that's a lot of drag to make up for.


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## NotMe

Understood MG. But people acting on the model might be feel very differently, no? Particularly if he didn't lead off with emphasizing the difference between a model and reality.


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## MoneyGal

The issue (for me) is faith in models. Reality is far less predictable - or, if you like, subject to far more randomness - than any model can incorporate. (Also why I disagree with over-reliance on "back-casting" models in finance)


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## none

MoneyGal said:


> The issue (for me) is faith in models. Reality is far less predictable - or, if you like, subject to far more randomness - than any model can incorporate. (Also why I disagree with over-reliance on "back-casting" models in finance)


That is completely untrue. A properly parameterized model can much more objectively incorporate uncertainty (or randomness as you say) than haphazard gut feelings. 

However, People frequently model poorly and underestimate uncertainty in their models so I will agree with you on that.

Interesting read: http://blogs.plos.org/models/


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## MoneyGal

Um. You do realize I work in the area of probability and finance, and until recently worked at a company housed at the Fields Institute for Research in Mathematical Sciences? I wasn't suggesting "gut feelings" as the alternative to models.


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## none

I didn't. Regardless, that doesn't mean that what you said isn't completely wrong.

What is your alternative to using a model then? What else is there besides gut feelings? I'd be interested in knowing.


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## MoneyGal

Holy sh*t. I build models for a living. What I actually said is that reality is more diverse than any model can incorporate. It's, like, the opposite of what you are claiming I said! My whole professional life revolves around _trying to build better models_, not abandoning them in favour of "gut feelings" or anything else.


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## MoneyGal

The blog you linked to is titled "All models are wrong...but some are useful." This was Fama's point as well. It's any model-builder's point. The goal is to create the most useful model possible. But _by definition_, models are not reality. And by experience, models are less diverse than reality.


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## none

What you said is this:

"Reality is far less predictable - or, if you like, subject to far more randomness - than any model can incorporate." 

If I wanted to understand diffusion rates and used a random walk model as a diffusion approximation I would get EXTREMELY close to what would actually be observed in nature. heck why don't I model the level of spread of 1000 randomly generated normally distributed random numbers. I assure you, the model I would use would work extremely well.

The broad brush you used is just wrong. Are their crappy models that are used out there? Absolutely, particularly in finance but there are some models out there that are fantastic at predictions, hence the viability of the space program, computers, etc etc etc.

I feel the urge to quote Donal Rumsfeld.....


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## MoneyGal

OK, add "in finance" to what I said. Finance models are generally *terrible.* HORRIBLE. I should have qualified that. I made the inadvertant assumption that on a finance board, in a comment about finance models, what I said would be understood to be a comment on finance models generally (i.e., "at an investing conference") not a comment on models.


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## none

Apology accepted.

I don't actually agree with what you are saying - again with your broad brush. For example, I assume for my broad based index funds that they should follow a biased random-walk model... which it does quite well.


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## Cal

For my 2c worth....

I can't see the lending rate going up much here for maybe 2 years, however I can see some regulatory changes perhaps to increase the cost of borrowing in regards to RE, and perhaps mortgage rates going up a little bit....

So unless something big happens, it would simply be supply and demand feeding the RE market...and if demand slows...I can't forsee the GTA condo market dropping less than 30%...and housing perhaps 10-15%, which imo isn't really a crash at all for the housing market.

Most places I have run the numbers on seem to rent for about 30% less than the total cost of buying (condo and house), but as mentined above by another poster, I can't see a detached in Rosedale dropping too much before someone buys it, regardless of rates.


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## none

@Cal

Maybe but I'm pretty sure they said the same thing in 1988 in TO.


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## Just a Guy

NotMe said:


> Another day, another crystal ball prediction.
> 
> What's interesting is the notion that a housing crash is both widespread across both property class, and property location.
> 
> In other words, the examples above about your condo falling in value 50% also suggest that the 'move up property' (detached single family home) also falls in value 50%. And that this move up property is in the same geographically centered location (ie Toronto proper) as the condo.
> 
> To me it seems far more likely that while a housing correction may occur (keep in mind, I've been thinking this literally since May 1, 2002, when I closed on my first condo) it may affect condos about 40% and SFH by 10%, and in some areas, by 0%. I just don't think you're going to get a $1.5M Rosedale mansion for $750,000 - ever. Ever. EVER. You may be able to do that for a condo in CityPlace, mind you. Or a SFH home in Pickering or Ajax or Brampton or some other far flung home. But places where people have wanted to live at least the last 60 years and have full grown trees? Much more doubtful to me anyway. Even during the correction of 2008, I still remember seeing houses in my nice but not tony area of Toronto (Don Mills/Lawrence) sell pretty quickly at full ask. YMMV.
> 
> It's just very hard to predict the market, so I prefer to predict my timing. MY wife and I bought a house when we had a son, and renting costs were about $3,000 for a full house (not a floor). I believe trying to time the market is very hard, hats off to those who do it. If I sold our house on a belief that the housing market will correct, and try to 'buy back in' once this housing market correction hits, I think that's a big risky move. Basically, if the correction was less than 50% or took longer than 1 year, my divorce attorney would eat up all my savings.
> 
> We'll see. So far my usual response has proven correct: Yes, I believe a housing correction should have occured by now. But it hasn't. So the future is hard to predict - and that doesn't always get sounded out loud enough. Richard Feynman, the physicist, said "It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with the experiment, it's wrong."
> 
> So far, it's been a long 11 years of no housing correction. Doesn't mean there will never be one or trees grow to the sky. Does mean that I hope the OP comes back in December 2014 either to gloat or admit he was wrong.


When you bought your first place what was the interest rate? By 2002, it was probably around 5.5% assuming good credit and discounts and the market was on fire...

Demand was high, as people could afford payments on houses about $250/month/100k of house value more than when we were at the historical average mortgage rate of 8%. 

What happened? People got into bidding wars on houses and prices increased...everyone was predicting housing was in a bubble and had to decline...were they wrong? In reality, interest rates lowered. The cycle repeated itself. People bought houses based on the payment they could afford, interest rates bottomed out at 2.7ish% last year! nearly half of what was an"unheard of rate" back in 2002.

Now rates have increased nearly 1% to about 3.7. People who bought let's say a 500k house and locked in for 5 years (at 2.7%) who can barely afford the payments, come up for renewal in 4 years. Let's say the interest doesn't increase...how many can afford a $500 increase in their mortgage payment every month?, what about $1000 if the interest rate is only 4.7%?

They'll of course try to sell, but others can't afford those type of payments either, so supply will force prices down, people will be on the hook for huge losses, and personal bankruptcy will go up.

I agree low end condos will suffer more than single family homes, but houses will decrease in value as well, and by more than 10% as supplies grow... High end housing will also drop, as what people can get for their money will increase. I recently sold one of my houses for just under what my inlaws sold their place for about 4 years ago, the difference was I wasn't in the fancy neighbourhood, and 4 years had driven up housing prices everywhere. Whoever bought my place, or my inlaws old place (had it sold on the same day at the inflated prices) will someday wake up and discover that no one in their right mind is going to pay those prices for those places. There was a reason why they were fairly stable for years prior to the last 12 years or so.

The price increases, in my humble opinion, was fuelled by lower interest, and people buying what they could afford in payments as opposed to what they needed. Now that interest rates can't fall anymore, and are destined to increase, reality is going to set in and force a correction because people won't be able to make payments.

It's not just housing either, all big ticket items are changing marketing from total cost to a payment model, it's even gone from monthly to bi-weekly to make it even more appealing...the difference in housing, which most people fail to realize, is that your payments are only locked in for 5 years usually and could increase significantly after that.

Of course, I predict the first wave of people will increase their amortization periods to try and offset their fate, but that can only delay things for a bit, as increasing the term doesn't lower the payment as much as an increase in the interest rate increases it...

This is not a crystal ball, this is watching traffics on the highway during a snowstorm...it's not a question of if something is going to happen, it's just a matter of waiting for the right circumstances to occur that will set off the dominos.


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## none

Right I think there are two important things to realize:
1) If house prices are not going up, them they are going down (considering the almost 10% cost of a complete by-sell transaction)
2) Assuming the above is true then prices can only NOT come down if interest rates NEVER EVER EVER rise again. Riiiight.


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## NotMe

Just a Guy said:


> When you bought your first place what was the interest rate? By 2002, it was probably around 5.5% assuming good credit and discounts and the market was on fire...
> 
> Demand was high, as people could afford payments on houses about $250/month/100k of house value more than when we were at the historical average mortgage rate of 8%.
> 
> What happened? People got into bidding wars on houses and prices increased...everyone was predicting housing was in a bubble and had to decline...were they wrong? In reality, interest rates lowered. The cycle repeated itself. People bought houses based on the payment they could afford, interest rates bottomed out at 2.7ish% last year! nearly half of what was an"unheard of rate" back in 2002.
> 
> Now rates have increased nearly 1% to about 3.7. People who bought let's say a 500k house and locked in for 5 years (at 2.7%) who can barely afford the payments, come up for renewal in 4 years. Let's say the interest doesn't increase...how many can afford a $500 increase in their mortgage payment every month?, what about $1000 if the interest rate is only 4.7%?
> 
> .


Good memory - I did indeed pay 5.35% 

Question: Won't most people just take out another 25 year term, if interest rates go up that much? I realize this creates an almost perpetual mortgage, and am not recommending it. But given the choice between eating catfood or extending the term, I think a lot of people would choose the term. Again, not saying it's perfect. Just that might happen. 

But like I said earlier, my main thing is I hope the OP comes back in December 2014 and tells us about the year that was.


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## none

you could do that but based on a 625K mortgage at 3%-25yr, your monthly is $2,957.79.

After 5 years of paying this off then your principle would be down to: $553,469.83

The monthly payments on a $553,470 mortgage moved back up to 25 years at 5% is: $3,219.01. Sure it helps but you're still an additional $3600 a year to buy stuff.

I think one thing that is rarely mentioned is that a productive society efficiently allocates skilled workers. If people are stuck in their houses and can't move then this is yet another housing induced drag on the economy.


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## Just a Guy

As I said, you can't amortize yourself out of the increases...adding an extra 5-10 years only decreases the total amount by a fraction as opposed the the massive increases of rising interest...


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## SpendLessEarnMore

I'm on fixed rate. If interest rates go up I'd probably take the variable rate, make lump sum payments and increase my mortgage payments a bit just to lessen the increase.


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## Just a Guy

May work, short term...what happens if the bank asks for an appraisal and a principle reduction? While not likely, if you are making your payments, but possible with a policy change. Remember, banks are in business to make money, not to supply you with a house.

Like right now, it's very hard to actually borrow any of this cheap money...even though there is a lot of it, qualifying is getting tough.


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## Taraz

I hope the housing market crashes - then I would buy a bigger house! 

Unfortunately, I don't think Edmonton area prices will undergo a significant correction (i.e. 10% or more) anytime soon. The inventory has been falling, and prices have slowly been creeping up. (Also, we already had a big correction a few years ago.)


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## Causalien

I am waiting for that hedge fund who is working to enable shorting of Canadian market. One of the reason I think we have this bubble is because it is so hard to short Canadian RE. There's that one insurer. I can't find any developers to short. So when it comes out, I will buy it as a hedge.

The other way I have hedged against this is to buy houses with huge land. So the valuation is about 4% house and 98% land.


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## Berubeland

I just want to note that models are superior to anecdotal evidence in the same way that applications are superior to just renting to someone based on belief in the landlord business. Yes there are limitations that should always be kept in mind but seeing as the alternative is worse, there's a purpose for it. 

I have been saying for a long time that the housing market doesn't make sense, just like I think people skateboarding off the roof of a house doesn't make sense. However; just because nobody's leg got broken today doesn't mean that it won't get broken someday. The bull argument is always well look you're wrong to think this way nothing is happening, therefore nothing will ever happen. 

The other item that has been overlooked over many times in the buy versus rent scenario is that houses are not investments and their primary purpose is to keep us out of the cold and wet. It's December and it would really really suck to live outside even for one night. Money, stocks and bonds do not have another use. In a way it's kind of foolish to regard a house as an "investment" it just isn't unless we all agree to pay more down the line. There is no guarantee of that. 

I come from an area that is profoundly economically depressed after mines and a sawmill closed down and for a while you could not sell a house and even giving it away would have been hard because you could not rent it. My own mom bought a house from the town for $37,000 in an auction. If there is no work no one will pay you the kinds of prices you think you should get. 

Right now as Canadians we all agree the real estate is a great thing but that mood can turn around faster than you can imagine.


----------



## Just a Guy

Taraz said:


> I hope the housing market crashes - then I would buy a bigger house!
> 
> Unfortunately, I don't think Edmonton area prices will undergo a significant correction (i.e. 10% or more) anytime soon. The inventory has been falling, and prices have slowly been creeping up. (Also, we already had a big correction a few years ago.)


I believe the average house price in Edmonton is $349k, the average income is around $40k, by the old rules of (2.5-3x average income) Edmonton is overpriced and could easily decrease by 50% if history has any say. Just because Edmonton is relatively cheap compared to Toronto, Vancouver, and Calgary, does not mean it's reasonably priced. Unlike Vancouver which has oceans, mountains, and climate, Edmonton doesn't have a lot of appeal as far as places to live (if there weren't jobs that is).


----------



## Taraz

Just a Guy said:


> I believe the average house price in Edmonton is $349k, the average income is around $40k, by the old rules of (2.5-3x average income) Edmonton is overpriced and could easily decrease by 50% if history has any say. Just because Edmonton is relatively cheap compared to Toronto, Vancouver, and Calgary, does not mean it's reasonably priced. Unlike Vancouver which has oceans, mountains, and climate, Edmonton doesn't have a lot of appeal as far as places to live (if there weren't jobs that is).


An affordable market would be one where the median house price is less than 3 times the gross before tax annual median household income, (not individual income). As of 2011, median family income was $91,860 (http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/famil107a-eng.htm). I suspect it's gone up at least a bit in the last few years, since we still have low unemployment, and it will continue to go up in the near future. 

The median home price is currently $324,700. (http://edmontonrealestateblog.com/2...et-ploughs-ahead-in-edmonton-in-november.html)

So let's say the median family income between 2011 and 2013 keeps up with inflation (according to the bank of Canada inflation calculator). In this case, current Edmonton median household income in 2013 would be $93,532.95. So the median house should cost $280,598.85 to be affordable. 

It's a bit off, granted, but not much; only about 15% away from affordable. Could we see a 15% price drop? Maybe, but only if the oil prices drop enough to slow hiring, thus reducing in-migration. Right now the housing demand is outstripping the supply. Instead, I suspect you will see upward pressure on wages in the short term, as companies compete for workers.


----------



## none

Are you kidding? With keystone dead and the US pumping so much oil and gas now I think it's only a matter of time until Alberta becomes a have not province again.


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## sags

I am thinking the government could be more pro-active on this issue.

I have yet to hear someone in the financial world answer one simple question directly.

"What happens to mortgages or secure lines of credit.......if the home price falls below what is owed"?

Flaherty should introduce legislation..........that as long as people make their payments..........the bank can't demand the equity difference upon renewal.

The demands of banks in this regard, were in part the cause of the whole US collapse.

Remember how they fought tooth and nail against ANY kind of mortgage resolution, extension or re-financing?

And they ended up with millions of vacant, abandoned and destroyed homes as a result.


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## nobleea

Taraz said:


> An affordable market would be one where the median house price is less than 3 times the gross before tax annual median household income, (not individual income). As of 2011, median family income was $91,860 (http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/famil107a-eng.htm). I suspect it's gone up at least a bit in the last few years, since we still have low unemployment, and it will continue to go up in the near future.
> 
> The median home price is currently $324,700. (http://edmontonrealestateblog.com/2...et-ploughs-ahead-in-edmonton-in-november.html)
> 
> So let's say the median family income between 2011 and 2013 keeps up with inflation (according to the bank of Canada inflation calculator). In this case, current Edmonton median household income in 2013 would be $93,532.95. So the median house should cost $280,598.85 to be affordable.
> 
> It's a bit off, granted, but not much; only about 15% away from affordable. Could we see a 15% price drop? Maybe, but only if the oil prices drop enough to slow hiring, thus reducing in-migration. Right now the housing demand is outstripping the supply. Instead, I suspect you will see upward pressure on wages in the short term, as companies compete for workers.


^ What Taraz said.

It would be nice to have a bit of a slowdown here. Maybe then we could actually hire some engineers. Trying to find an english speaking engineer is nigh impossible, and that's with healthy pay. It would be nice if 1 in every 10 cars wasn't from out of province. Many have no respect for the city, throwing garbage out their windows as they drive along. It would be nice if you could actually get a reservation at a restaurant on the weekend. Most say no reservations, because they don't have to take them to be full. You still see 'help wanted' ads everywhere, though it tends to be skilled work nowadays.

If you're listing cities that are most likely to have corrections, or ranking the ones with the biggest corrections, Edmonton is not the one I would focus on. I doubt it makes top 10.
Oil would have to go under 80$ and stay for 6 months or more before things would change here. It could certainly happen, though the rest of Canada would be in just as bad of shape, likely worse.


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## Four Pillars

Causalien said:


> The other way I have hedged against this is to buy houses with huge land. So the valuation is about 4% house and 98% land.


I don't get it - how is this a hedge against a falling real estate market?


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## Cal

none - I hope you are right and there is a drop in RE bigger than I can for-see, I would love to get a better entry point to buy more RE, current prices just don't make sense to me. The amount of money vs the return in rent, generally isn't worth it here in the GTA.


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## doctrine

I rent in BC and it's actually impressive the cost difference. It's easily 50% cheaper and thats conservatively speaking; not accounting for large unexpected house expenses, nor accounting for the time I don't have to put into maintenance. Of course, I am saving the difference and have cash available if I chose to buy a house, but its really unlikely I will out here. Perhaps in the future if/when I move back east. In the meantime, enjoying saving 50-60% over houseowners and taking advantage of the very low tax rates here.


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## none

I don't. I know a lot of people who, I think, will lose a life-time crippling amount of money. From what I see as not real fault of their own. They fell for the unstoppable real estate story that was pushed by parents and the media alike.

Anyway, I rent for cheaper than owning so doesn't matter to me anyway (well cheaper as long as market goes up less than mortgage interest rate).


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## SpendLessEarnMore

Interesting from that statcan link that Toronto and Vancouver have the lowest family median household income of under $70k yet Oshawa comes out at $84k.

I own both a house in Mississauga and Calgary. The one in Mississauga that I bought at $205k has almost doubled in value since I bought it less than 5 years ago. There's definitely going to be a correction there. The Calgary house I picked up on the correction price of $191k from $225k. But Calgary I don't see a correction happening despite a median family income of $97k and median house value of $420k which is more than 4 times.

But who knows what the future holds. Alberta's economy is heavily depended on oil resources. Where oil goes everything else follows.


Calgary too has gone through a recent correction and is recovering from it. Add in the fact net migration to Calgary and Edmonton insanely outpaces any other city in Canada and vacancy rate is just 1 percent. There's a huge demand for housing in both Edmonton and Calgary.



Taraz said:


> An affordable market would be one where the median house price is less than 3 times the gross before tax annual median household income, (not individual income). As of 2011, median family income was $91,860 (http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/famil107a-eng.htm). I suspect it's gone up at least a bit in the last few years, since we still have low unemployment, and it will continue to go up in the near future.
> 
> The median home price is currently $324,700. (http://edmontonrealestateblog.com/2...et-ploughs-ahead-in-edmonton-in-november.html)
> 
> So let's say the median family income between 2011 and 2013 keeps up with inflation (according to the bank of Canada inflation calculator). In this case, current Edmonton median household income in 2013 would be $93,532.95. So the median house should cost $280,598.85 to be affordable.
> 
> It's a bit off, granted, but not much; only about 15% away from affordable. Could we see a 15% price drop? Maybe, but only if the oil prices drop enough to slow hiring, thus reducing in-migration. Right now the housing demand is outstripping the supply. Instead, I suspect you will see upward pressure on wages in the short term, as companies compete for workers.


----------



## Causalien

Four Pillars said:


> I don't get it - how is this a hedge against a falling real estate market?


There is no technical reason. But emotionally, what happens in a downward market is that lands get devalued less than house. With a house that fills 80% of the land, you have to account for maintenance and vandalism. So when the land account for most of the valuation, it is more of a farm than a residential house.

It's a lesson I learned from the great exodus of montral during the referendm. This is assuming you still need a house when the RE market collapse. If you are willing to switch to renting, then that's a better way, but I'd rather create max amount if HELOC room now, wait for the collapse and then use the HELpC to buy.


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## Just a Guy

If your land theory was correct, then acreages and farms would retain more value...in my experience, there is far less demand for those, especially in a down market. Also, recreation property (lake lots for example) also suffer greatly. As for city lots with small houses, perhaps you retain the "lot" price on something like that for people who want to tear down the house and rebuild...other than that, I can't really see a scenario where your theory holds much water...

But that's just an opinion.


----------



## Causalien

Just a Guy said:


> If your land theory was correct, then acreages and farms would retain more value...in my experience, there is far less demand for those, especially in a down market. Also, recreation property (lake lots for example) also suffer greatly. As for city lots with small houses, perhaps you retain the "lot" price on something like that for people who want to tear down the house and rebuild...other than that, I can't really see a scenario where your theory holds much water...
> 
> But that's just an opinion.


You are right there is less demand for farms, but they also retain more value since there is an underlying hedge against apocalypse for farms and they can often be valued based on the productive crops they produce each year.

Let's use condos as counter example to your example. Condos drop faster than detached houses as condos are purely construction with each unit owning only 1/100 of the land in some cases. (I am talking total % of price at peak as Conodos are cheaper than houses most of the times) 
Also in Vancouver, if you have a farmland right now, everyone wants it due to a convergence of several special circumstances. 

I derived my data from 10 investment houses in Montreal during the great exodus of the referendum. The ones that retained the most value are the ones with the smallest % of land area used for the house. Of course applying this data to other city might not be correct, but I will rely on my own experience since there is nothing else in my life that is comparable to what might happen.

And your last sentence is exactly why I buy these houses with huge land area. It just retains the lot price that is valued by city. The city valuation, although just smoke and mirrors, is a good bargaining chip when negotiating a sale. During boom times, you will never go below the city valuation, during bust times... well, it depends on what type of bust. Are we going Las Vegas style? Or are we going Portoand Oregon style?

Anyway, how are you guys hedging against the coming collapse? I am seeing more and more bubble bursting articles popping up everywhere and even in the USA.


----------



## Just a Guy

A big problem with your idea is ability. People may like the idea of a farm, but farming has changed a lot in the last 20 years, so have people. I doubt many of the current generation could handle owning a farm. Subsistence farming has all but disappeared, and even most farm kids have left the land and forgotten the needed skills.

The large land areas I see are valuable if they are close to a major city, but only as potential developments...smaller farms are otherwise just an albatross. I could easily sell my condos and houses in the major cities, probably in a reasonable timeframe, but my acreages...those take a long time to sell, even in good times.

As for hedging, I buy properties based on cash flow, not price. My places need to cash flow in a down economy (at least break even). I also buy stocks (usually during a bust) and own a couple of companies. To me, this is diversification...unlike the idea of diversifying meaning buying just stocks...but a mix of them.

I always look at an investment from a worst case scenario, not the best case.


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## Mall Guy

MoneyGal said:


> OK, add "in finance" to what I said. Finance models are generally *terrible.* HORRIBLE. I should have qualified that. I made the inadvertant assumption that on a finance board, in a comment about finance models, what I said would be understood to be a comment on finance models generally (i.e., "at an investing conference") not a comment on models.


I gotta say reading through this threat, most of you are in what I would call "violent agreement" (arguing nuance of the same argument) . . . sorry I missed the whole back and forth on models . . . Victoria's Secrete just opened in the mall . . . could find no fault with those models . . . but my point, and I do have one, is people, lighten-up a little cause the world is going to end tomorrow, or the next day, not really sure which day . . . but that's what makes a market ! BTW, love the enthusiasm !


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## none

I agree - I just don't like it when people make blanket statements that are so wrong.

Are there lots of crappy models? Yes. Are there lots of crappy financial models: sure. Are all financial models bad? - no - some are quite good. For example, modelling has shown that a couch potato portfolio will beat managed portfolios 80-90% of the time over ten years. 

My entire investment approach (and many MANY peoples) is built on the assumption that a diversified portfolio follows a biased random walk model. This model seems to work pretty well for A LOT of people.

To throw out a statement that all financial models are bad is just wrong.


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## SpendLessEarnMore

A family friend who is a financial advisor contacted me so I'm meeting him in a couple weeks when I fly back to Toronto next week. This should be interesting knowing how structured they are.


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## Causalien

Just a Guy said:


> A big problem with your idea is ability. People may like the idea of a farm, but farming has changed a lot in the last 20 years, so have people. I doubt many of the current generation could handle owning a farm. Subsistence farming has all but disappeared, and even most farm kids have left the land and forgotten the needed skills.
> 
> The large land areas I see are valuable if they are close to a major city, but only as potential developments...smaller farms are otherwise just an albatross. I could easily sell my condos and houses in the major cities, probably in a reasonable timeframe, but my acreages...those take a long time to sell, even in good times.
> 
> As for hedging, I buy properties based on cash flow, not price. My places need to cash flow in a down economy (at least break even). I also buy stocks (usually during a bust) and own a couple of companies. To me, this is diversification...unlike the idea of diversifying meaning buying just stocks...but a mix of them.
> 
> I always look at an investment from a worst case scenario, not the best case.


This is where we diverge in style. My idea has no problem with me. Your idea has plenty of problems with me as managing lots of condos with people as tenants is a big headache IMO. People are the biggest time sink in any business dealings and is not a skill hat everyone has. I can only handle 2 tenants max at any time and it eats into my leisure time. Farming is a lot easier for people of my trade, especially after the recent wave of automation that is sweeping the industry. Get a plot of land, slap on a 100k farming truck of the monsanto crop of your choosing and you are good to go in a simplified manner (ps dog foods have the best premiuns as they uses tip grade grain) In a zombie apocalypse, you do it by hand or start a cult. i'd rather buy a homebuilder stock or reit than owning condos and rent them out.

If you are buying houses in downtown major cities like van, toronto or montreal, how are you finding cash flow positive RE right now? That is something that I think the whole forum would benefit. By the look of things where i am with 1~2mil condos in van, I can only prep for a crash.


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## Just a Guy

Causalien said:


> If you are buying houses in downtown major cities like van, toronto or montreal, how are you finding cash flow positive RE right now? That is something that I think the whole forum would benefit. By the look of things where i am with 1~2mil condos in van, I can only prep for a crash.


I'd say I probably buy my properties in the locations similar to you...outside the overpriced areas that think they are the only game in town. I doubt you find much farmland in any of those places either. Fortunately, Canada is a really big place. If you have a wider view, it's easier to find what you are looking for.

I'm not against farming, I just said it's harder to divest yourself of the property. I could flip one of my rentals in probably 30 days, my acreages...well that could take up to a year or more, demand isn't as high. 

All that being said, I'm a buy and hold kind of investor...all my properties need to make me cash flow, including the acreages, but farming has it's own headaches like weather, machinery, the supply/demand pricing...it's no better/worse than having tenants in my opinion. They both have issues, and they are both way less of a hassle than having a real job.


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## SkyFall

went throught the whole thread very good read. As a student who is styding in Finance and work at the local bank, I don't really picture myself buying a house in the medium term future 5-10years I don't know why I just feel more free renting and WORST WORST case scenario which I am knocking on wood to not encounter this, I just gonna ask parents if I can stay at their place a few months to build up cash which they will accept gratefully!


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## none

That's the rub. In some ways renting is far superior to owning, particularly when you look at a risk/rental cost basis.

People love houses which I don't really get. Inanimate objects should be unworthy of ones affection. Whatever though, I have a great car which is kind of dumb but it is fun to drive.

I'm in Victoria though and decided on renting 2 years ago. So far, I've missed losing 10% on leveraged cash and made about 15% on what my down payment would have been so it seems (so far) I made the right call. Of course, I was recently evicted so I get to spend my night packing which totally blows. Seems like there aren't many free rides.


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## SkyFall

But the funny thing is, in my case, is I've seen how much money you can make on RE. My brother in law had the chance to make good money when he was young and he owns two condos in downtown Montreal and on my girlfriend's side, her dad is in construction so he builts houses, lives in it and sell'em off, but for me I just never was attracted as an investment toward RE as an investment (and not because it's not making money) also I think renting can get me a better place for the same money then buying. That's only my young/lack experienced opinion.


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## Just a Guy

Real estate is not for everyone, the same goes for stocks, bonds, or owning a business... It's a lot easier to make money in something if you understand and enjoy it.


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## marina628

You hit the nail on the head Just A Guy ,I spend 1-2 hours every single day looking at MLS and The Florida /Georgia mailers from my real estate agents.I enjoy the process of finding a property then I turn it over to a property manager to find me a tenant etc.


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## none

Just a Guy said:


> Real estate is not for everyone, the same goes for stocks, bonds, or owning a business... It's a lot easier to make money in something if you understand and enjoy it.


True dat.


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## Hawkdog

none said:


> y
> 
> I think one thing that is rarely mentioned is that a productive society efficiently allocates skilled workers. If people are stuck in their houses and can't move then this is yet another housing induced drag on the economy.


This is a very broad statement, something out of a textbook.

Canada has a resource based economy.
A large percentage of resource jobs are camp jobs which allow employees to live anywhere in Canada they want. 
The company I work for employs people from Vancouver Island all the way to Nova Scotia. And we send employees overseas.
Same goes for any drilling outfit that works in Alberta or any mine across the country.


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## none

Agreed.


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## Hawkdog

none said:


> I don't. I know a lot of people who, I think, will lose a life-time crippling amount of money. From what I see as not real fault of their own. T.


Do you think that crippling amount will equal the amount lost by Canadian investors in the 2008 stock market correction? Especially those that sold out at the bottom?

There is increasing talk that the stock market will correct again soon. Could be a double whammy if the both RE and the stock market correct at the same time in Canada.
Interesting article on "what is a bubble?"
http://turnkeyanalyst.com/2013/12/16/so-what-exactly-is-a-bubble-anyway/


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## andrewf

Relatively few people work in primary resource industries. That "Canada is a resource economy" is a bit of a red herring. Resource extraction is very capital intensive, and relatively light on labour.


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## Hawkdog

andrewf said:


> Relatively few people work in primary resource industries. That "Canada is a resource economy" is a bit of a red herring. Resource extraction is very capital intensive, and relatively light on labour.


 About 10% of the workforce which is fairly significant works in the resource industry, and the sector makes up close to 20% of the GDP. The key factor is they are well paying jobs.

Everything you use everyday is likely derived from resource extraction in some fashion.


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## andrewf

Depends on how you measure (wikipedia):




> These primary [resource] industries are increasingly becoming less important to the overall economy. Only some 4% of Canadians are employed in these fields, and they account for 6.2% of GDP


You need to start counting services and related industries to get up to 20%.


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## Hawkdog

yes that includes service industries. 

"Canada’s abundant natural resources are the backbone of our economy. 

This country has an enormous wealth of natural resources: from the world’s third-largest proven oil reserves to vast natural gas fields, tremendous hydroelectric capacity, massive tracts of forests and an abundance of minerals and metals.

Our natural resources and the wealth they generate help give Canadians a quality of life that is second to none.

It’s no exaggeration to say that the resource sector is the cornerstone of Canada’s economy. Natural resources account for 13 percent of our gross domestic product (GDP) and 50 percent of our exports. When you include the spin-off industries that provide goods and services to the sector, natural resources account for nearly 20 percent of our GDP.

The energy, mining and forestry industries provide over $30 billion a year in revenue to governments — money that supports critical social programs such as health, education and public pensions. That $30 billion is equal to half of all spending by governments on hospitals in Canada last year.

About 950,000 Canadians currently work in natural resource sectors. Another 850,000 in every province and territory work in industries that service the sector. That’s a powerful economic engine, creating 10 percent of all jobs in Canada."


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## Hawkdog

getting off topic, sorry for hijacking thread.

But if you look around BC and the areas that are booming, its booming due to natural resources.


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## none

I wouldn't say that exclusively, you must admit cheap credit has A LOT to do with it. Sure, good paying jobs AND cheap credit make it hot but if you take one of those away I doubt the market would remain robust.


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## Hawkdog

Can't argue about cheap credit. But it doesn't have as big of an effect when houses aren't as expensive as major centers.

Statistics and Facts:

The Northwest Transmission Line will be a 344-kilometre, 287-kilovolt transmission line between Skeena Substation near Terrace and a new substation near Bob Quinn Lake. The line will be in service by spring 2014.
The NTL will provide a source of electricity to potential mining projects in the area and an interconnection point for the AltGas Forrest Kerr run-of-river hydro-electric project. These developments will provide long term job opportunities in the region. Strong labour demand is also coming from other projects, including the Rio Tinto Alcan modernization project, and the Kitimat liquefied natural gas plant/pipeline project.
Collectively, capital projects in the region are expected to account for more than $7.5 billion in construction alone by 2014.
Phase 1 of the Labour Market Partnership Program included labour market analysis and the development of a human resources strategy encompassing recruiting and training. Phase 2 of the program will focus on implementation of the HR strategy.


----------



## Hawkdog

interesting to see the rental versus buying breakdown on these numbers

Fort St. John made the list. According to Verico's information, the 2012 average price for a home in the city was around $334,000, while the average home price in 2013 was around $363,000 – an increase of about 8.6 per cent. An average rent was marked at $2,800 for the city.

would you pay 1700/month for a mortgage or 2800 per month rent?


----------



## Cal

Same thing for a townhouse my wife and i were looking at. When all things are considered....about $3200 (including the potential return for your downpayment) to buy or $2000 a month to rent similar model down the street.

In the GTA imo it is all about cheap credit, and low monthly payments.


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## Just a Guy

Not everyone has a down payment, nor the credit rating to get a mortgage. Lending has really tightened up in the past year...it's not like a few years ago where anyone with a pulse could get a loan.


----------



## andrewf

Hawkdog said:


> interesting to see the rental versus buying breakdown on these numbers
> 
> Fort St. John made the list. According to Verico's information, the 2012 average price for a home in the city was around $334,000, while the average home price in 2013 was around $363,000 – an increase of about 8.6 per cent. An average rent was marked at $2,800 for the city.
> 
> would you pay 1700/month for a mortgage or 2800 per month rent?


Tell me about this house with total cost of ownership equal to the mortgage payment.


----------



## Causalien

Hawkdog said:


> getting off topic, sorry for hijacking thread.
> 
> But if you look around BC and the areas that are booming, its booming due to natural resources.


Yeah BC supposedly has a lot of mining headquarters. Mining sector isn't doing too well nowadays with the USA taper ahead.

In Vancouver, housing price is definitely due to cheap credit. There are no argument. There's a 5-5-5 plan touted by condo builder. I am sick of reading it. 5% down, with 5% lent to you by banks and 5% cash back. I seem to remember the same ad during the height of the USA real estate crash. Except these are in Chinese, so I am guessing the RE regulators can't read them. Some of the condos are coming down in prices from the stratospheric $400k I remember seeing 2 years ago so at least I have some hope to finally see a condo crash.


----------



## Hawkdog

Causalien said:


> Yeah BC supposedly has a lot of mining headquarters. Mining sector isn't doing too well nowadays with the USA taper ahead.
> 
> In Vancouver, housing price is definitely due to cheap credit. There are no argument. There's a 5-5-5 plan touted by condo builder. I am sick of reading it. 5% down, with 5% lent to you by banks and 5% cash back. I seem to remember the same ad during the height of the USA real estate crash. Except these are in Chinese, so I am guessing the RE regulators can't read them. Some of the condos are coming down in prices from the stratospheric $400k I remember seeing 2 years ago so at least I have some hope to finally see a condo crash.


I don't think anyone is arguing the real estate market in Vancouver.

The mining sector will pick up, there isn't much out there that isn't made of something mined. Equity companies are already starting to pick projects from cash strapped juniors.


----------



## Hawkdog

andrewf said:


> Tell me about this house with total cost of ownership equal to the mortgage payment.


It won't be equal. But I didn't add a down payment into the mortgage calculator either, i just used 360000. 
But I don't see the cost of ownership being more than 1100 month either. 
FSJ has been ranked number 3 on the list of cities in bc to invest in. 
http://www.reincanada.com/PressRele...f-British-Columbias-Top-Investment-Towns.aspx


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## Just a Guy

REIN has made a lot of investors very rich. Usually by buying the properties they recommended to their "investors" shortly after they (the REIN members) went into bankruptcy. 

They seem to be the pump and dump gang for real estate.


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## Hawkdog

didn't know, thanks for pointing that out.



Just a Guy said:


> REIN has made a lot of investors very rich. Usually by buying the properties they recommended to their "investors" shortly after they (the REIN members) went into bankruptcy.
> 
> They seem to be the pump and dump gang for real estate.


----------



## andrewf

What I've seen of REIN doesn't give me much confidence in following their advice. (trying not to get sued)


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## sags

andrewf said:


> Tell me about this house with total cost of ownership equal to the mortgage payment.


We owned 6 homes over a span of 30 years.

Every one of them required some big outlay of cash.............for one reason or another.

You are right about a home "costing" much more than a mortgage payment.

The way they build "lower end" homes today, they will be lucky if they are still standing in 30 years.

I have seen some well built, beautifully crafted new homes........with state of the art building techniques.........but they aren't to be found in the lower end of new housing.

If I was doing it over again..............

I would buy the best "used" home (time for walls to settle, and problems to be fixed), built by the best builders (most reputable and likely the most expensive), in the best area (never to move again), that I could afford (30% of gross family income).

Moving "up" doesn't pay off in the long run (except for realtors and lawyers) and buying a "cheap" home doesn't either.

If a person can't afford to do that..........rent.........until they can.


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## Causalien

Yep. My old tear down uses solid hardwood beams that will not rot. The whole structure is valued at $20,000 right now. 

The HAM monster houses that they are building down the street uses state of the art particle 2x4 boards stapled together to form a beam. The structures are valued at at least $200,000. I'd wager $20,000 that mine will still be there when these monster houses start crumbling due to rot and fungus. But who is going to know. These HAM only saw the finished product where dry walls cover up everything.


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