# Wait for the market bubble pop ?



## OK-bachelor (May 24, 2011)

I hope links to YouTube are ok here. 
I watched this video today and it makes me think it’s better to wait for a correction to buy rather than taking advantage of low interest rates now. Not all regions are the same but I think this pandemic will probably cause a major correction in the coming months. My situation is that I’m a 1 house owner with no mortgage and I’m looking around at landlord possibilities as cash flow and investment. What do you guys think about waiting ? For example, nobody wants to buy for 300k now to see it drop to 275k next year. Unless of course you plan on living in it for a long time.


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## Money172375 (Jun 29, 2018)

My friend, who is 45 said the same thing in 2005, 2007, 2008, 2009, 2010, 2011...you get the point. He bought his first house in 2017....right before the housing pullback. He could have bought the same house in 2005 for less than half the price.

trying to predict the housing market is like trying to predict the stock market.


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## Thal81 (Sep 5, 2017)

I have no crystal ball but it think there's good reason to think real estate might go through turbulent times in the next 6 months or so. Things could get really gloomy in the winter when CERB and other economic programs run out, then the return to school causes a massive second wave of Covid and jobs are lost again as we need to tighten the social distancing. People might well need to sell the house in favour of buying something smaller or renting...


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## nathan79 (Feb 21, 2011)

It definitely makes you think -- if not for the mortgage deferrals and CERB, what would the housing market look like right now? But I get the impression that most people think the danger has passed and we're in the clear. 

The real estate industry likes to point out that most people who lost their jobs during the pandemic aren't homeowners in the first place. I'm not sure how true that is, but it's clear that many homeowners are still feeling the crunch in one way or another. Perhaps they're still employed, but getting fewer hours, or their tenants are not paying rent. Job losses usually start at the bottom and work their way up. Just because someone hasn't lost their job yet, doesn't mean they won't. Many businesses are hanging by a thread right now. If they've already trimmed down their frontline staff to a minimum and still can't turn a profit, who's next?

We know that 16% of mortgage holders have taken a deferral, and about 9% still have active deferrals. It's been reported that lenders are lukewarm about extending deferrals and will likely go forward on a case-by-case basis. If I was a lender, I'd be looking closely at the employment prospects of anyone requesting an extension of their deferral. What's the point of giving someone an extension if there's little chance they'll be employed anytime soon?

Mortgage deferrals alone probably don't tell the entire story. Not every homeowner who is feeling pain would necessarily take a deferral. Some will keep scraping together their mortgage payment, right up until they can't. Some will rely on a combination of savings and CERB, or selling other assets in order to make their payments. 

Anecdotally, one of my friend's parents recently had to sell their house because they'd accumulated too much debt. I was really surprised to hear this, because they are (or were) high earners and I'd always assumed they had plenty of money. It's the kind of thing no one talks about until it happens.


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## OK-bachelor (May 24, 2011)

nathan79 said:


> It definitely makes you think -- if not for the mortgage deferrals and CERB, what would the housing market look like right now? But I get the impression that most people think the danger has passed and we're in the clear.
> 
> The real estate industry likes to point out that most people who lost their jobs during the pandemic aren't homeowners in the first place. I'm not sure how true that is, but it's clear that many homeowners are still feeling the crunch in one way or another. Perhaps they're still employed, but getting fewer hours, or their tenants are not paying rent. Job losses usually start at the bottom and work their way up. Just because someone hasn't lost their job yet, doesn't mean they won't. Many businesses are hanging by a thread right now. If they've already trimmed down their frontline staff to a minimum and still can't turn a profit, who's next?
> 
> ...


Personal debt is a part of the flawed economy. Lots of people who earn deep into six figures spend beyond their means. Conservatives, Liberals or NDP can’t stop the temptation. Marketing has become extremely effective. Last I heard Canada was in the hole for about $ 250 billion in mortgages alone.


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## Mortgage u/w (Feb 6, 2014)

Its always a good time to buy when you find a good deal. Stay in good locations and you have nothing to loose unless you buy a negative cash-flowing rental property.
If you're in it for the long term, then there is no point in waiting. If you want to time the market, you're better off investing in lottery tickets.


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## Juggernaut92 (Aug 9, 2020)

I am watching how the housing market goes as well. I agree thal81 that some people may be in trouble in the next year when government programs run out.


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## STech (Jun 7, 2016)

Money172375 said:


> My friend, who is 45 said the same thing in 2005, 2007, 2008, 2009, 2010, 2011...you get the point. He bought his first house in 2017....right before the housing pullback. He could have bought the same house in 2005 for less than half the price.
> 
> trying to predict the housing market is like trying to predict the stock market.


You have no idea how close I personally became to being just like your friend. Around '05, university degree in hand, OSAP paid off, and savings for a down payment. 95% of people told me to wait for the crash. The crash was inevitable, these prices are crazy, one guy told me he bought his house in Mississauga for $42,000, and no house should ever cost over $150,000.

Unlike your friend, I didn't listen to the 95%, but looked at the actions of the 5% who were better off, and actually knew what they were talking about. I bought 2 houses since '05, and both of them have more than doubled. To the point, where I couldn't afford them both right now if I waited for the "inevitable crash", and I would still be paying rent almost 2 decades.

2 sayings are extremely true, write them down somewhere and only revisit them years from now, and tell me how well they've held up.

1. Economists accurately predicted 9 of the last 2 recessions.
2. Predictions are hard. Especially about the future.


If I wrote a book on doom and gloom, and how you must protect yourself at all costs right now of the inevitable doomsday coming, then I'll sell millions of copies. If I wrote a book on how the only real economy that matters, is your own individual economy, and how absolutely no one can predict the future, then I'm very likely to not even sell a single copy. 




OK-bachelor said:


> My situation is that I’m a 1 house owner with no mortgage and I’m looking around at landlord possibilities as cash flow and investment. What do you guys think about waiting ? For example, nobody wants to buy for 300k now to see it drop to 275k next year. Unless of course you plan on living in it for a long time.


You're most definitely not looking at it as an investor.

Investor says, nice property, good cash flow, nice return on my money that's just sitting in the bank earning nothing, and I've locked in a low mortgage rate, using other people's money. If prices drop by a whopping 10% next year, I'm still cash flow positive on a great property that history says is likely to recover and double in price in a decade.

Speculator says, I'll just wait and see if the price drops.


Study the area you want to buy in, have your own finances and economy in mind. A housing crash in Alberta has had 0 impact on the GTA or Vancouver, and vise a versa. If you're adamant you've read everything and trust all of the experts, and houses in Mississauga will once again cost $42,000 then please buy me some lottery tickets. You pick the numbers, you buy the tickets, and I promise to give you 95% of the winnings, no questions asked.


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## STech (Jun 7, 2016)

"Predictions are hard. Especially about the future". 









Canadian Banks See Borrowers Resuming Payments After Deferrals - BNN Bloomberg


Three of Canada’s six biggest banks said Tuesday they expect most borrowers who took advantage of pandemic-related deferral programs to resume payments, countering fears of a sharp increase in impaired loans.




www.bnnbloomberg.ca


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## nathan79 (Feb 21, 2011)

I'll refrain from making any predictions, but anybody can massage statistics to craft a narrative.



> At Bank of Nova Scotia, 99% of mortgage borrowers whose deferrals have expired are current on their payments, the lender said in a statement. Scotiabank now has *C$39 billion ($30 billion) of deferral exposure, down from C$41.5 billion* as of July 31, and expects the “vast majority” of its remaining balances to expire this quarter, Chief Executive Officer Brian Porter said in the statement.


Put another way, 94% of mortgages that were on deferral as of July 31st are still on deferral. (That's a lot!) Of those whose deferrals have expired (they don't say how many), 1% are delinquent. Sounds worse, right? -- But it's essentially saying the same thing.

Even if only 1% of mortgages eventually go into foreclosure, would that not put downwards pressure on real estate prices? What is the magic number?

I agree that there's a chance the whole "deferral cliff" could end up having a minimal impact, but I think it's too early to say. On the balance, I'd say there's more probability to the downside than the upside. Notwithstanding the deferral situation, fall and winter is traditionally a slow period in real estate anyways, so it seems unlikely we'll see much upward movement prices over the next six months. 

Would I advise someone to hold of on purchasing a home they could afford right now? No, provided they're confident in their finances and ability to weather whatever the economy throws at us over the next 12 months.


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## STech (Jun 7, 2016)

nathan79 said:


> Even if only 1% of mortgages eventually go into foreclosure, would that not put downwards pressure on real estate prices? What is the magic number?


1% of a single lender's loans (commercial and residential) going bad isn't gonna mean too much.


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## Mortgage u/w (Feb 6, 2014)

nathan79 said:


> I'll refrain from making any predictions, but anybody can massage statistics to craft a narrative.
> 
> 
> 
> ...


What is missing out of this equation is the amount of deferrals from the start of the pandemic. July 31st was the second wave. I can assure you that over 50% of mortgages that were on deferral payment from April have now resumed regular payment and that's a common statistic across all lenders. So its not 94%.....you can, however, say its an additional 6% that came off the program. 

So the true story is that the deferral program helped enormously and avoided many people from defaulting on their mortgages. It also goes to show that 50% of those who opted for the deferral program didn't really need it. They took it cause they thought it was free money. Lenders were so overwhelmed with requests that they granted it to whoever asked, without question.


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## Just a Guy (Mar 27, 2012)

I’ve been predicting a correction for years, however it hasn’t slowed my buying. Unlike the stock market houses don’t sell at market price, each one sells at its own price, so you can get deals anytime. It’s how I find one beds for 45-50k when the average listing for them is 70k. Some people have to sell for various reasons. I’d be looking and have an idea of what I want and what I want to spend and start working with a realtor to find a place. You never know what you’ll find.


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## twowheeled (Jan 15, 2011)

I have been waiting on the sidelines since 2012. And sidelined myself out of the stock market around 2017 preparing for a crash using such metrics as CAPE ratios, debt to GDP, etc. One thing I have learned is that markets can be irrational and overpriced for a long time. I'm starting to rethink the canadian RE market. The truth is there's still a lot if money on the sidelines just like you and I. Waiting for that opportunity to buy the dip.

I think (and yes I am a bit resentful and cynical) that the RE market is one of the most inefficient. There's a lot of stupidity and dumb decision making just like any market where participants are the general population who are mainly guided by the industry with their own interests in mind. I don't believe the government would ever let a full blown real estate crash occur in Canada. They would prop it up at all costs including inflation and ruining the currency. It is such an enormous component of our economy like it or not. Personally for me, I've waited so long that I've had to re-examine even what a 20% crash would mean to my personal finances (it sure doesn't look as life ending as it did when I was 23).

If you can't afford to buy but you're afraid of being priced out of the market, why not put your savings into REITs? That would in theory set your entry point. If the market crashes, sure your investment falls but your purchase price also drops.

Scenarios like JAG mentioned just sound like fairy tales. They don't make any logical sense. Is it implying that a certain type of seller holds a property (1 bedroom condo in this case) that is worth 70k. For some reason lists it opaquely where nobody else besides well connected realtors can see, away from the general public in order to sell it at a 50% discount to it's value. This sounds as plausible as me taking a 1oz gold coin into a metal recycling yard desperately hocking it for $500. We aren't talking about having the liquidity to offer 10M cash on a 14M property. A lot of investors can put down $50k without needing financing. What can your well connected agent view that I cannot by sorting properties from lowest cost in my area? And who is the idiot selling their property at a 50% discount that needs to close the sale overnight?


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## Just a Guy (Mar 27, 2012)

I never said anything about opaque listings all the properties I buy are on mls. I just have my realtor email me them as soon as they hit mls. I just bought a property this weekend for 45k, has a tenant at $825/month. the original mls listing is for 70k, it sat on the market for months. The owners bought a building and wanted to divest their individual units (probably has to to qualify for funding). My banker, who asked me to mentor him, bought one from the same people for 49.9k for a second floor one bedroom. Also listed originally for 70k. people can list for whatever they want, but right now there are very few buyers, so we can dictate the price as there is no competition. The pressure is on for the seller in this case, they could do the deal or loose the bigger deal, so they do the deal.

also, i never said the property was worth 70k, I said it was listed for 70k, may even appraise for 70k, but the reality is, you can have an opinion as to what real estate is worth, but the real value of a property is what someone else is willing to pay for that property, everything else is a fairy take to keep you thinking you’re rich. you can brag about how much you think your house is worth, but you’ll never really know until someone writes you a cheque. 

Easy to say they’re fairly tales as you sit on the sidelines not even looking or making offers...


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## JackJac (Mar 13, 2017)

Just a Guy said:


> I never said anything about opaque listings all the properties I buy are on mls. I just have my realtor email me them as soon as they hit mls. I just bought a property this weekend for 45k, has a tenant at $825/month. the original mls listing is for 70k, it sat on the market for months. The owners bought a building and wanted to divest their individual units (probably has to to qualify for funding). My banker, who asked me to mentor him, bought one from the same people for 49.9k for a second floor one bedroom. Also listed originally for 70k. people can list for whatever they want, but right now there are very few buyers, so we can dictate the price as there is no competition. The pressure is on for the seller in this case, they could do the deal or loose the bigger deal, so they do the deal.
> 
> also, i never said the property was worth 70k, I said it was listed for 70k, may even appraise for 70k, but the reality is, you can have an opinion as to what real estate is worth, but the real value of a property is what someone else is willing to pay for that property, everything else is a fairy take to keep you thinking you’re rich. you can brag about how much you think your house is worth, but you’ll never really know until someone writes you a cheque.
> 
> Easy to say they’re fairly tales as you sit on the sidelines not even looking or making offers...


Can you please tell me the location where you bought a tenanted property for 45K, renting for $825/month?


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## Just a Guy (Mar 27, 2012)

Not and maintain my privacy...which I value more than your opinion. But you can search recently sold properties on mls and se that it happens all over the place.

I can give you a hint though, it’s not in gta or gva. But Canada has a lot of major cities beside them.

of course, you want me to do the work for you, typical. Not good enough that I outline exactly what you need to do, I have to do it for you as well, and pay for it too while I’m at it.


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## JackJac (Mar 13, 2017)

Just a Guy said:


> Not and maintain my privacy...which I value more than your opinion. But you can search recently sold properties on mls and se that it happens all over the place.
> 
> I can give you a hint though, it’s not in gta or gva. But Canada has a lot of major cities beside them.
> 
> of course, you want me to do the work for you, typical. Not good enough that I outline exactly what you need to do, I have to do it for you as well, and pay for it too while I’m at it.


You sound pretty bitter. Perhaps there is good reason for that. Have a nice night.


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## Just a Guy (Mar 27, 2012)

Yep. Because people like you are a dime a dozen. I hear it all the time from the lazy people unwilling to do the minimum amount of work and still cry sour grapes all the time. These same people then demand I pay more to support them in the name of “fairness”.


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## JackJac (Mar 13, 2017)

Just a Guy said:


> Yep. Because people like you are a dime a dozen. I hear it all the time from the lazy people unwilling to do the minimum amount of work and still cry sour grapes all the time. These same people then demand I pay more to support them in the name of “fairness”.


Thanks for re-affirming my suspicion that you seem to have some "issues". Once again, goodnight.


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## Just a Guy (Mar 27, 2012)

Sorry, I don’t like being called a liar by people living in their parent’s basement.


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## andrewf (Mar 1, 2010)

CAPE is not really meant as a market-timing tool. It is more about giving estimates for expected future returns. You might lighten up on markets that are overvalued but it doesn't suggest getting out of stocks completely unless valuations are truly ludicrous (late 80s Japan with a CAPE in the 80s).


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## Mortgage u/w (Feb 6, 2014)

twowheeled said:


> I have been waiting on the sidelines since 2012. And sidelined myself out of the stock market around 2017 preparing for a crash using such metrics as CAPE ratios, debt to GDP, etc. One thing I have learned is that markets can be irrational and overpriced for a long time. I'm starting to rethink the canadian RE market. The truth is there's still a lot if money on the sidelines just like you and I. Waiting for that opportunity to buy the dip.
> 
> I think (and yes I am a bit resentful and cynical) that the RE market is one of the most inefficient. There's a lot of stupidity and dumb decision making just like any market where participants are the general population who are mainly guided by the industry with their own interests in mind. I don't believe the government would ever let a full blown real estate crash occur in Canada. They would prop it up at all costs including inflation and ruining the currency. It is such an enormous component of our economy like it or not. Personally for me, I've waited so long that I've had to re-examine even what a 20% crash would mean to my personal finances (it sure doesn't look as life ending as it did when I was 23).
> 
> ...


Once again, you can't time the market.

If you are considering to put your life savings in RE, then I could understand your concern. 
For me, investing in RE is a long-term commitment. So market crashes, dips or whatever else prevents you from sleeping at night, doesn't scare me.

Yes prices are at an all-time high. But property managers are still buying - and buying at record levels. There no longer exists a 'rule of thumb' out there, where people once valued a rental property by multiplying the revenue by 8 times. If you were to do that today, you'd be looking at 20-25 times revenue......for a good buy. 

Property managers have a lot of cash on hand. So they will easily dump 2-3 times more down-payment to acquire a property. They know that the value will go up as they renovate the properties and increase rents.

You may think people are ignorant.....but they aren't. I've always said, "smart lives off ignorance".


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## peterk (May 16, 2010)

Well, I'm about to buy a luxurious, expensive house in quite possibly the most volatile, risky city in the entire country... We'll see how it goes!! 

These interest rates are now extreme (instead of just "low"), and we should not forget the main lesson the past decade of real estate - The price doesn't matter. People will take on whatever price of house it is that matches the payment they can afford. And affordability has just gone way, way up recently compared to 1 yr ago.


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## Beaver101 (Nov 14, 2011)

^ I think you'll be fine given your other 3 pillars are strong/stable.


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