# Thoughts about home ownership.



## Fraser19 (Aug 23, 2013)

Hey guys,

I am not looking to buy a house yet or for the next few year. But I have been thinking about the process for a while. I have two trains of thought going on right now.

The first one is buying a more inexpensive home that I can pay the mortgage down quickly, but not a place I plan on staying in for 10+ years.
Or
Spending more and seeking a house I could theoretically live in the the remainder of my life.

Naturally I am on board with not buying more home than I would need. But realistically if I want to stay in a home for 30+ years, I would need to buy more home than I need at the time. I see all these people that think they did so well when they sell there house and move up. But when I factor in the Realtor fees, and interest usually did made next to nothing or lost money.

At this time I am more inclined to thinking it makes more sense to buy the home I would plan on keeping for 30+ years even if it costs more up front and takes longer to pay off. Plus I hate everything involved in moving.

So what are your thoughts?


----------



## Just a Guy (Mar 27, 2012)

First off, a home is usually a pretty lousy investment if you actually factor in all the costs.

Second, the average Canadian moves every 7 years. It's very rare that anyone know what they'll need for the next 30 years today, so chances are you'll find yourself moving, even if you don't plan to.

Next, you really haven't given any indication about other factors, how old are you, are you married, have or planning to have kids, what is your career looking like...all theses items, and many more can have a significant impact on your future housing needs, so you're not painting a very detailed picture.

Remember: Plans rarely last past the first moments of battle.


----------



## uptoolate (Oct 9, 2011)

Or only until you get punched in the face!


----------



## sags (May 15, 2010)

When we went through our home buying years, we wanted it for the family......backyard, privacy, garage, family room....etc.

Back then, if you got your money back plus realty fees..........you did pretty good. Free rent is what we thought........but of course we were wrong.

After 5 years of payments, we barely paid off any of the mortgage and it was mostly interest to the bank........and it was a lot at 8-19% interest rates.

Kudos to those in bubble areas that have gotten wealthy from their home. They won the "House pays my retirement lottery".

For those who bought the homes of the lottery winners, it may be the "House screwed my retirement".

Everyone can't be a winner................unless home prices can keep rising into the heavens.


----------



## Fraser19 (Aug 23, 2013)

Just a Guy said:


> First off, a home is usually a pretty lousy investment if you actually factor in all the costs.
> 
> Second, the average Canadian moves every 7 years. It's very rare that anyone know what they'll need for the next 30 years today, so chances are you'll find yourself moving, even if you don't plan to.
> 
> ...


25, not planning on buying until 28-30. Depends a lot on what comes up, but I am putting away a lot of money for a down payment.
Relationship future indicates marriage. But at the same time I am 25, so when stepping into a realistic view like you said predicting the future is not possible.
At this time I am not too committed to having kids, but there is a part of me that wants them, and I expect it will grow over time. So probably later in life.
Moving into finance within the next six months. So I am making a career change right now and we will see how that goes, but for now I am excited.

I am not looking at a house as a cash generating investment. Just a place to live, my goals around home ownership are to waste as little money as possible and have something that is mine. I am not wanting to flip houses, or rent them. Perhaps one day but for now it is just not something that is on my radar.

Truth is I have lived a lot like my parents, pay cash for most everything that is possible. Buy something you can use for decades, they buy a car and drive it until death. They have owned two houses in there lives, first one for raising a family and the second one was when they in there 50's and decided to buy something newer and nicer that they could live the rest of there lives in.

I see how these things have worked for them and for the most part I follow there ways of living. My parents have been financially free for the last 20 years and they never did anything too dramatic to achieve this. Just bought what they wanted with the intent to make it last.


----------



## uptoolate (Oct 9, 2011)

I didn't buy until I was 31, had found my partner and was pretty much sure of where I would be living for several years to come. Only had that house for 6 years until upgrading to the current one that we have had for 20+ years. Wound up with too many kids for the original house. Every time you move there are significant costs. I would say rent until your life is clearer. Just a matter of flexibility. Also, if I were in Toronto or Vancouver, I definitely wouldn't be buying at this point. At some point prices in these markets are likely to correct.


----------



## Fraser19 (Aug 23, 2013)

uptoolate said:


> I would say rent until your life is clearer.


Which is what I am doing. A house is a big thing to take on, and I am not in a position where it would be intelligent for me to do so.


----------



## rikk (May 28, 2012)

Fraser19 said:


> Hey guys,
> 
> I am not looking to buy a house yet or for the next few year. But I have been thinking about the process for a while. I have two trains of thought going on right now ... buying a more inexpensive home that I can pay the mortgage down quickly, but not a place I plan on staying in for 10+ years ... Or ...Spending more and seeking a house I could theoretically live in the the remainder of my life ... At this time I am more inclined to thinking it makes more sense to buy the home I would plan on keeping for 30+ years even if it costs more up front and takes longer to pay off. Plus I hate everything involved in moving.So what are your thoughts?


There is a 3rd train ... buy a place that meets near term requirements and that can be legally, structurally, cost effectively (versus buying the big place up front) remodeled down the road. Having said that, I have no idea if adding on, building on, 10 years down the road is still cost effective versus just buying big. Worked for me but that was in '93.


----------



## Just a Guy (Mar 27, 2012)

Well, your spouse will play a big role in where you live, as they will have their opinion as well. I'd say, in your current condition, you are more likely to move than stay in one place.

I'd suggest you actually change rental places several times. Many people don't have the "experience" to know what they want in a house until they've lived in a few places. As you move, you find things you like and dislike about places...kitchen layout, room sizes, specs usage, bathrooms, etc.

Many people who build their first "dream house" as their first place, often renovate or move because they find what looks good on paper, or seemed right when they first saw it, doesn't actually work as well in their real lives...

Sometimes you need to learn what you'll like in the future.


----------



## MoreMiles (Apr 20, 2011)

People usually climb 'property ladder' Very few people are lucky enough to buy a detached $1m home. So be prepared to start with a condo, then town home, then semi detached, and detached. You will likely move a few times in your life so don't get too attached to a house. It's just an object and not a person.


----------



## crazyjackcsa (Aug 8, 2010)

A surefire way of losing out is climbing the property ladder. Each move represents massive costs that will conspire against you.

5% realtor fees on sales, land transfer taxes on purchases, lawyer fees on both sides, and unequal appreciation. ie, a more desirable property is increasing in value faster than your less desirable property.

I'm not saying buy more house than you can afford or want, but buying your forever home first is a good way to do it.


----------



## My Own Advisor (Sep 24, 2012)

sags said:


> Kudos to those in bubble areas that have gotten wealthy from their home. They won the "House pays my retirement lottery".
> 
> For those who bought the homes of the lottery winners, it may be the "House screwed my retirement".
> 
> Everyone can't be a winner................unless home prices can keep rising into the heavens.


I've been thinking the exact same thing. Folks that have bought and rode the home equity wave in VAN, TOR, CAL and other cities, tripling their home values in 10 years or so. Kudos to them. The wave of a lifetime. 

That's not us in Ottawa.


----------



## CalgaryPotato (Mar 7, 2015)

In the 2000's a lot of people felt like genius's doing the property ladder climb. I still have friends who think they are brilliant become they simply bought and sold houses over and over again, and the market kept climbing. If you do that now, don't expect that same feeling of genius.

I'd say middle ground, I don't think there is a point of buying a house that'll outgrow in the next couple of years. For my wife and I we bought a home that we knew would be big enough but not ideal when we had kids, with the plan to upgrade. We've decided to hold off on upgrading for now, but our is still just fine for us. I know other people who've been in the same situation for over 30 years. You aren't in your perfect dream house, but you are in a house you can live with. If you can afford to do that, I'd recommend it personally.

Remember, no matter how big of a house you buy you will fill it, especially if you have kids. If you buy a bigger house, with plans of kids, literally keep some rooms completely empty. As much of your house as you reasonably can.


----------



## amitdi (May 31, 2012)

If only I would get a nickel everytime I saw a post where ppl mix financial and non-financial things and compare them. Here, you are also making decisions for 10 years from now. so whatever you decide, you are probably going to be wrong....How do you know if you buy a bigger house, 10 yrs from now you'll think its going to suffice you for 30 yrs?

Also, what are your priorities? House or not losing money? You cannot get everything. What can you give up? If I were you, I would go for a house that I need for next 10 years. That way, you have a choice after 10 years whether to upgrade, when to upgrade. you are also saving on taxes, maintainence, etc. Ofcourse, it goes away if you spend some of it on sale commissions, moving but atleast you have a choice. Trust me, having a choice is an important factor when future has so many uncertainties.


----------



## wendi1 (Oct 2, 2013)

I think the "starter house" is a mistake, too. Sounds like you don't really need to buy right now - why not wait until things settle down?


----------



## nobleea (Oct 11, 2013)

Many of my friends bought houses when they were your age. Many of the houses had custom features. They were all so sure that this would be the house they retire in. Of course, fast forward 7-10 years, and almost all of them have moved to something else. For sure THIS one is the one they'll retire in. Of course it's not.

Growing up in a military family, we moved around a lot. I'm currently in my 11th home and am soon to turn 37. I've never harboured any thoughts that any house is going to be one we live in for more than 10 years.

I would say wait until you're married and have at least one kid. Kids change everything.


----------



## Eclectic12 (Oct 20, 2010)

crazyjackcsa said:


> A surefire way of losing out is climbing the property ladder. Each move represents massive costs that will conspire against you.
> 5% realtor fees on sales, land transfer taxes on purchases, lawyer fees on both sides, and unequal appreciation. ie, a more desirable property is increasing in value faster than your less desirable property...


The costs are important to consider but there are a lot of variable at play so YMMV. Moving from Kitchener-Waterloo/Kingsville to Toronto/Ottawa is likely to work against one. Moving in the opposite direction meant co-workers went from a condo with no land to a detached house with a large yard where the condo proceeds meant no mortgage.


Cheers


----------



## Eclectic12 (Oct 20, 2010)

My Own Advisor said:


> sags said:
> 
> 
> > ... Kudos to those in bubble areas that have gotten wealthy from their home. They won the "House pays my retirement lottery"...
> ...


If they haven't sold, moved elsewhere to realise the gain, it may be paper profits that bear only a partial relationship to the proceeds by the time they do sell. Of course the challenge is to find an affordable place to move to or ways of diversifying.




My Own Advisor said:


> That's not us in Ottawa.


Maybe not ... but a couple that worked in the same company found it profitable to sell their Ottawa condo for a larger detached home in Waterloo, with a yard and without a mortgage.


Cheers


----------



## IFITSTOBEITSUP2ME (Mar 6, 2015)

Been finding this thread really interesting compared to our family's and friends experiences which I want to share with the OP to get maybe another perspective. So parents paid UK400 cash for land and for land and to build house in 1960 cost them UK4000. Father worried himself initially about owing the bank part of the build costs, and they paid loan of lickety split. In 1987 sold for UK82,000. Same property in 2007 was for sale at $688,000.

We bought house in June 87 UK36,500. Sold in May 1988 for $68,000 to build house on a piece of land we developed and built up into 4th largest free range egg farm in the whole of the UK (from little acorns ..... 300 initial layers turned into many thousands). Bought another house in same town in 1993 for UK47,000 sold 18 months later for UK72,000. Bought the last one after selling the farm and business operations as felt it would be easier to try and sell once we got our visas to emigrate to Canada than trying to sell a business or farm.

Rented in Canada for 18 months due to the "unknown" and kicked ourselves many times since for not buying much much sooner. Finally bought house in 1997 for $196,000 sold in 2004 for $297,000. Bought piece of land for $129,000 and built house on it 2003/4 costing total around $450,000. Today value somewhere between $1.2m and $1.35m depending whom you talk to and what you compare stats to of course.

The above were just our main residences that provided a roof over our heads and a safe, secure and enjoyable environment to raise our family. So as you can see for us we have always preferred paying our own roof over our heads than paying a landlords mortgage for them. The one time we did when arriving in Canada, we watched property values go up substantially from what we could have paid a year and half earlier, and then mortgages were assumable here without qualifying for them.

In addition to having somewhere to live, we have purchased, built, rented and sold various properties from condos through to single family detached in major areas, smaller outlying bedroom communities and acreages. There is only one property that we ordered in April 2006, was delivered to us in July 2008 (remember when the market collapsed!) that is if we were to sell that condo today at current pulled back market values again, probably after realtor fees, closing costs etc worth only maybe $10,000 over what we paid. However, it is positive cash flowing $600 per month on rent, so mortgage has paid down substantially. When we saw the values escalating in 2006 we made a wrong emotionally decision to jump back on the revenue train. We currently own 5 properties and are in the process of now offloading everything again to head into permanent retirement involving lots of travel.

In May 2005 we sold our last revenue property we owned at that time, just deciding we didn't want to deal with tenants any more (big mistake but who could have known what would happen in 2006 and early 2007). That last revenue property SF Detached we bought 18 months earlier at $135K, just wrong area attracted wrong type of tenants or we lost our ability to read the applicants??? and it sold for $168,000. That same property 10 years later would easily sell in the upper $390's, and a year ago in the $430,000 range (pre crude prices).

We have a now 52 year old friend that bought 9 properties back pre 1993 (prices in 1995 were worth fractionally less than 1993 prices) for $69,000 to $93,000. Everyone of those properties have been paid off for years, rents are between $1500 and $1695 per month and would easily sell at $320,000 to $380,000 each. About 6 or 7 years ago he bought an 8 suite building for $1m painted, cleaned it up, increased the rents substantially but still fair market value and that building is worth at least double and some what he paid. He decided the returns he could get just leaving monies in the bank weren't cutting it. Ironically as well at the time he bought that 8 suiter everyone was telling him "Awwww, don't you think prices are too lofty right now".

Another friend (in his 70's now), bought a hotel in Montana in the 1980's some rulings changed and he had to be a resident manager or something in the States at that time and he ended up bankrupt trying to keep it all together. He had to rent of course, but then after 18 months decided he didn't want to be paying his landlords mortgage. He approached an older couple that were selling one half of their duplex, based it on 3 independent appraisals and he would get first refusal if they sold the half they lived in. Couple years later he owned both sides and he and wife paid rent to themselves and then did the same approach on another duplex when that mortgage with rising rents got paid down within about 7 half years. He used 3 x rents to pay down the third half, and then the owners of other half sold to him so he had 4 x rents paying that half. Second duplex completely paid down after 4 years. He did the same approach again but this time on a whole duplex and had that paid down with 6 x rents. Now he and wife are retired and enjoying the income from these paid down properties and I believe have bought two others. With no children and still in good health I don't know whether they will soon start offloading a property each year or what. Either way they are set up for a good retirement.

As you can see OP, there are quite a few folks out there that have built a good retirement buying property in a large economic centre, with a long term goal in mind for holding if necessary upon each purchase. We've seen many that planned on fixing and flipping, and whilst that may have worked on one or three initially being profitable, eventually the market switched on them. We've always, bought/built everything other than our main residences with the intention of either selling at a set profit on possession or ensuring the figures made sense before signing on the dotted line to be able to rent out if market went against us.

Your parents sound like good role models for you, talk to them in depth about why they bought and didn't rent and what type of return they saw on their initial investment whilst at the same time providing their own roof over their family's heads! Ask them what do they think might have happened if they'd maybe just bought one or two more properties and rented them out in regards to their golden years?

For sure renting isn't for everyone, but ourselves, relatives and our friends have found starting on the property ladder at a young age, initially using OPM, and by being picky landlords when interviewing, and even on occasion leaving a place empty for a month rather than getting the wrong tenants in, the sacrifices have enabled us to now move forwards to our retirement dreams with a very good 7 figure fund.

Just sharing a different perspective and experiences for you, look at Forbes richest and see how many outside of inheritance or building high tech companies made their fortunes in Real Estate. It's really not all bad if you go into it young with baby steps in a good sized economic area and always always with long term hold in mind. Why not consider buying something now that would work for you but be easy to rent out later on should you get married have kids etc. It's of course your comfort level that matters, but for us we chose to pay our own mortgage rather than a landlords one, preferred the security of knowing and being able to personalize it as ours, and liked the security of knowing that once we were on the property ladder we went with it up, down or static. I've met many folks over the years that wish they'd bought years earlier when prices were cheaper or they could qualify for more. Of course just like the stock markets there's never a guarantee that the market won't pull back due to some news of some kind, but long term, what have property prices done in the past 10 year brackets typically assuming a large economic centre?

Edited to add = FWIW: Our youngest daughter now 24, bought a house near her University 4 years ago at age 20, renting out the rooms has got her through University debt free and when she finally qualifies in 2 more years hopefully she'll have well over 6 figures in her bank account (two thirds of that not connected to selling the property!).


----------



## sags (May 15, 2010)

Real estate has performed very well in the past.

Even in my situation, where we never realized a huge increase in the price of the house, we were quite happy to live in a nice home and get most of our money back. 

Lots of people bought and sold and made a little here and a little there. Some were smart or lucky...........the smart ones bought duplexes and walk-ups and rented them out, and the lucky ones happened to live in an area where property prices took off.........for one reason or another.

But..........and I think this is a big factor to consider today.

During all that length of time in the past, the economy was growing and wages were keeping up with inflation. The % cost of ownership...........even with much higher interest rates (7% average), was much more affordable than it is today, because homeowners didn't owe the non-mortgage debt they do today (credit cards, HELOCs, car loans) or pay for other things that seem mandatory now but didn't exist before (cellphone bills, cable and internet bills)

The combination of stagnant wages dampened by a very weak economy (recession looming with one more month of negative GDP growth), outsourcing jobs to low cost foreign companies also driving down wages, record levels of debt and skyrocketing home prices...........are squeezing home owner budgets like never before.

Canadians used to save 20% of their income.......even as they were buying homes. Today they are saving nothing.

Mortgage debt is approaching 100% of income in some areas, and personal debt is 161%. This trend is not sustainable.

Over time we have moved from single earner families to double earner families........to double earner families borrowing a lot of money to pay the bills.

Low interest rates are allowing people to squeak by month to month, but some day interest rates will go up.

With both people already working, family income is maxed out.

When we bought homes, the most expensive time was at the start. As time went on, we received generous wage increases each year and the % cost of our mortgage payments from our income continually went down each year.

Today, with record low interest rates and no wage growth, it is likely to be the other way around.

Their % of income to own the home will rise over time, until it is unaffordable.

I think this is a time when a confluence of factors HAS made it different...........and not in a good way.


----------



## Just a Guy (Mar 27, 2012)

Okay, on the surface, I completely agree with you, except for a few things...

First off, real estate in Europe is completely different than real estate in Canada. In Europe, land is a lot more scarce than in Canada. Second, it's usually thought of as a multigenerational investment. In fact they even have multigenerational mortgages. People don't tend to move around as much in Europe, and many live in inherited properties. The whole psychology of real estate is different there, so it doesn't make a good comparison.

Second, let's look at your timeframe. On the whole, you were active from the 90's until 2005 or even today. If you look at the market, you had perfect timing. The market took off on a unpresidented bull market in the 90's and, to some extent, is still in it. It would be like saying the stock market is the perfect investment if you lived in the 1920's because you couldn't seem to lose money if you tried...the 1930's however proved somewhat different...

I've been buying real estate over the same period, so I've also done well, but that doesn't mean I believe that the glory days are going to continue. In fact, over the last few years, I've already seen signs of a correction.

Real estate doesn't seem to work in step with the economy. The effects of the economy on the market seem to trail the cause by several years. To me this actually makes sense as people tend to lock in mortgages so, if you overpaid today, you don't need to really face the consequences until renewal time.

When the market tanked in 2007/8, real estate didn't collapse then, prices kind of froze, but the sellers had probably bought several years earlier, so could get out without losing a lot, as the market had 5ish years of increases leading up to it.

The people who bought just before the panic however, overpaid for their properties which, on paper tumbled overnight. About 3-5 years later, guess what started appearing on the foreclosure market. These were the properties I started picking up at less than 40% of the previous purchase price. Imagine taking a 60% loss or more in under 5 years. It does happen, even over the same time period where you and I both made a lot of money.

The market today has been hit with a number of unexpected factors (low oil, stagnant economy, job losses, etc.), yet the market isn't tumbling...yet. I, personally don't expect it to start falling yet. But give it a few years and let's see what happens. In the past, each mortgage renewal was greeted with lower interest rates and generally higher market prices...

Well, interest rates don't have much room to go lower, and current market prices don't have much inspiration to go higher. People who overpay today, may be the ones left standing now that the music is stopping.

Do I love real estate? Sure do, it's been a great producer for me, but that doesn't make me want to buy at any price. In the 90's you could have paid a rediculous amount of money for a place, and still been successful in real estate. That didn't make you a smart investor, you were lucky to get in at the right time. The mark of a true investor is to make money, and preserve wealth, in any economy both up and especially down.

I beleive, and I could be wrong, that the market can't continue to grow anywhere near the same rate as it has since the 90's. That doesn't mean I have stopped buying, what it means is I've got to be careful what I buy. I actually fully expect the market to slowly start to correct over the next few years, and probably take a huge hit at some point in the future as reality sets in. Then there will be many buying opportunities, as well as an entire generation who fears real estate as an investment. Look at the generation who came out of the depression, they wouldn't touch stocks if you handed it to them.

If I were someone considering investing or purchasing property today, I'd be cautious. The market they face isn't the same as the one which we did. To forget that is setting themselves up for failure, or do you think your current house is really going to be worth 3-4 million dollars in 10 years? At some point sanity will return to the market, and your house may be only worth $500k (a little more than what it cost). Which scenario do you think is more likely?


----------



## IFITSTOBEITSUP2ME (Mar 6, 2015)

As I said I was just offering a different perspective to the OP, based on others experiences in time. With all due respect many of these comments could be applied to the financial markets, and if one is to look at an apples to apples comparison of varying 25 year periods as suggested throughout time, there appears for the most part to be a similar correlation going back to our grandparents and before in RE purchases. Remember I did reference large economic centres not low density small town living with huge commutes for most working folks.

As for us today facing different issues, do you not think for one minute in various eras in time gone long before us our forefathers didn't say and think the same things about so called "progress", cost of things and so on? I remember my father making a list of the cost of basic groceries and supplies every two or three years in the 1950's, 1960's, 1970's and 1980's = up, up, up, with an odd pull back for a few months/couple years here and there. When he passed away we found these handwritten notes and it truly was a huge eye opener.

As for wages, these have risen since long before time I can remember, however admittedly the % cost applied as an average has risen exponentially on some items, but again that occurred with certain line items back in many other decades before.

Probably the best thing for us all to remember, that for every view point/experience, there is always a counter response by a.n.other, and none of us have that luxury of the crystal ball moving forward aka "I think or I'm sure .......this will happen".

With all due respect Just a Guy and Sags you may be quite right that the sky will fall in on our real estate markets, but remember for almost every seller of a stock/ETF/Index etc that thinks it is going down and should get out, there is a buyer thinking they should buy now because it's going up. Look how many folks bailed out in 2008/9 after/during the market crashes, yet those that stayed the course have seen their monies and a lot more returned since it curled back up. Yet again look how many folks have been saying for the past half dozen years or so "interest rates can't go any lower", the past couple years "the markets can't keep going up any more getting too lofty", yet both have. How many of us are sitting on the fence right now worried to put our monies in some indexes thinking it's got to all correct soon, and in 5 years time we could very well be saying "wish I'd done it back in 2015", or will we be saying "thank heavens I listened to my gut and didn't invest then". None of us have a crystal ball and at any moment in time if there's two options, one side will be right. Also talk to those that saw and have been invested in during several crashes in I think it was 1987, and the dot com bubble and burst in 90's and still stayed in during 2008/9. 

As for wages, I've never known such a division between folks as I've witnessed in the last decade. So many earning high six figure incomes and so very many earning in that $35,000 to $45,000 range. Yet ironically those we personally know that have some chronological mileage behind them now and are what one might deem "financially comfortable", were in that lower income range in their main jobs. They typically drive a 10+ year old car and just always lived below their means, but comfortably and found other changes to make when increased costs outside their control exceeded their budgets.

One thing I do find today that we didn't experience so much a couple decades ago and further is too much governing body interference, necessitating too much risk at the front end and huge expenditure to meet requirements if one wishes to start up a business. For example, if one wants to start say a bakery today, they have to commit to a long term lease and huge investments due to all the governing in running such a business. Years ago, they could start off their kitchen table, test the market and move into commercial spaces as their businesses grew. Likewise we used to sell our eggs when we started at the gate, grading them on a machine in our garage for size. We grew our business slowly but surely until we provided a large customer base over time. You couldn't do it that way today due to so many bodies to answer to and more importantly pay to meet "their" requirements of today. Heck to produce at the same level we were at when we enquired in Ontario in 1995 back then they wanted over half a million dollars for a quota just to get permission to produce the eggs = that's before buying land, buildings, equipment, livestock etc. Guess what we said to them!!

So yes Sags things are different today, but that's what our forefathers said about many changes during their life times, and on many occasions before all our times, I'm sure they too thought at times the sky was going to fall in.

Going back to the OP, I just shared this with you to get a different perspective as there always is on everything in life. Remember no one is right all the time on what they do or what timing they think in any type of market place whether it be RE, Financials etc. Some contrarians do better than some trend followers so should you be a trend follower or a contrarian?

Bottom line all any of us can do is read and digest varying different perspectives and make our own choices based on what makes sense to us personally at that time with the least risk to reward ratio.

Good luck with your decision I'll enjoy reading which way you decide to go in time.


----------



## Just a Guy (Mar 27, 2012)

You'll note, I did not say stay out of the market, nor am I staying out of the market. I would also point out that I did tie it to the stock market.

In general, markets tend to rise continually, and I agree with that, and Real estate is a great hedge against inflation. However, there are times when the market, any market, goes overboard...Read about the Dutch Tulip Market in the 1800's, the stock market in the 20's, the gold market in the 80's, internet stocks in the 90's, US housing in 2007...the list is long, and covers every market.

Now, if you bought stocks in 1929, before the crash, and held them until today (assuming the company is still around) yes, you did quite well despite the 30's. If you bought Tulip bulbs at the peak, you're probably still waiting...

I'm not saying real estate is a tulip bulb, all I'm saying is it's had an incredible, unsustainable, run and will need time for the economy to catch up. At some point, in the future, I believe your house will probably sell for 4 million dollars, but that will be in an economy where everything has risen relative to the same value.

Buying at the peak, and paying top dollar, just because the market has always gone up isn't a good investing strategy.

The nice thing about real estate is, the prices aren't all the same. I can find a cheap place even in a booming economy, unlike stocks where the price is the same for everyone at a certain time.

If you can find a good deal, real estate is a good investment, but not all real estate is a good investment just because it's real estate. I know where you can buy entire towns for under $10,000...the only thing missing is people. The town has been abandoned for decades...hard to make money with it, but someday...


----------



## sags (May 15, 2010)

The world isn't going to collapse, but in my experience most people buying a home..........just aren't interested in a well built plain Jane home, they can readily afford.

They "want" a huge home with all the trimmings. They "have" managed to save none of their own money.......despite not owning a home or having kids yet.

Mom and dad step in, refinance their home, and give the kids a down payment...........or maybe the lender or builder kicks it in.

People are borrowing from their RRSP to buy a home and can't pay back the loan. People in Hamilton, Ontario get the down payment from the city..........on an interest free loan.

This is what the problem is. People with no money buying homes they can't afford. 

We are treating life time mortgages like a car loan.......except the car loan is better. The interest rates are guaranteed for the whole duration of the debt........unlike a mortgage.

And unlike trying to make a car payment in hard times...........it is a lot more difficult to make a mortgage payment on an asset that costs 10 tens more.

If a person loses their job, they can move to where there is work and sleep in the car if they have to. They can sleep in their house but they can't move it to the jobs.

This is happening in the US where many people are still stuck in their homes with an underwater mortgage. They are trapped in place and can't move.

People also compare home ownership to the stock market............as if that is the only 2 choices there are.

If both markets are tanking............put your money into secure GICs or under the mattress.

Preservation of capital is paramount. A 50% drop in the price of an asset...........means it has to grow 100% just to get back to even again.

That could take decades.


----------

