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Housing drop looming in Canada?

LORI MCLEOD

Globe and Mail Update

Latest comment posted at 2:04 PM EST 27/06/08

Canadian market seems to be tracking that of the U.S., with two-year lag, BMO Nesbitt economist says ...Read the full article

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  1. Aloha Eric from Toronto, Canada writes: Housing is a fail safe investment! Housing always goes up! It's different this time, we're in a new paradigm! They're ain't making any more land y'know! It's different in Canada! It's different in my area! It's different for my house!

    Here's my favourite paper from Robert Schiller, Yale Economist and creator of the S&P Case Schiller home price index, and presented to the US federal reserve board of governors including Ben Bernanke:
    http://cowles.econ.yale.edu/P/cd/d16a/d1630.pdf
  2. Yvonne Wackernagel from Woodville, Canada writes: Aloha Eric from Toronto -HOW MUCH ARE YOU WILLING TO BET ON IT?
  3. Alastair james Berry from NANAIMO BC, Canada writes:
    I don't know about the two year lag, but out here on Vancouver Island, Nanaimo, we have a LUXURY SEAFRONT DEVELOPMENT that is still looking for buyers for what looks like half the homes after about 18 months on the market. For sale signs sprout like mushrooms everywhere.

    With our paper mill closed,a heavy machinery manufacturer bankrupt, sawmills closed,auctioned off or on short time, and the salmon and herring fisheries in a state of near collapse things do not look too good.

    What seems to sustain the market, to a degree, is the stream of retirees gulled into thinking that FLOWERS BLOOM ALL YEAR ROUND, because of the annual Victoria flower count in winter and SUZUKI (of GLOBAL WARMING FAME) claiming that the island weather should get warmer(which certainly SHOWS NO SIGN OF HAPPENING OVER THE LAST DECADE.)......and our hill tops are still deep in snow although we are now past mid-summer's day.
  4. Binder Dundat from Toronto, Canada writes: bring on the bar-goons!
  5. sudhir jain from Canada writes: Your home is NOT an investment, it is a place to live the way you want it and without restraints from a landlord. To consider it as an investment and worry about prices is a meaningless exercise. If you sell it you have to find another place to live and what makes you think that will not be equally more expensive. When it comes to housing, we are in a boat together. Lower the tide safer the boat is. Similarly, lower house prices mean easier to buy for our kids. Of course, I am talking in relative to income terms, not absolute dollars.
  6. Yvonne Wackernagel from Woodville, Canada writes: sudhir jain from Canada : Sir, you make a lot of sense to me.
  7. Don Portz from Trochu AB, Canada writes: Well said! judhie jaid. The only time that your home can be considered is when you decide to escape the housing market altogether. That only happens usually when you decide to move into the rental market , move out of the country or die (of course if you die then it is only of a concern to the beneficiaries).
  8. Thernan Riekal from Canada writes: I sure wish that Toronto's market would crash. A nice drop of 40% would actually make homes affordable for first time buyers.

    Maybe if we are lucky, there will be a few thousand layoffs in the financial sector and things will cool down.

    Try finding a decent condo here...investors grab up all the good properties and leave nothing but junk in the first few days of a condo opening.
  9. b me from Beantown, Canada writes: I would like to point out that Aloha Eric was using the device called sarcasm. It seems to have been lost on some of the other posters. Note the high number of real estate cliches.
  10. Rick Antonowicz from Toronto, Canada writes: BMO Nesbitt should not be issuing statements of this kind (based on weak data presented in this article) as well as the Globe reporting on it; if one does not want to see a self fulfilling prophecy to happen. As a result of this article, how many households will be listing their homes for sale in a panic? Especially those that did not see the question mark at the end of the headline? The Globe should be a whole lot more aware of the influence it has on the general public at large not to mention BMO Nesbitt's assessment of the housing market . We are not the US, we do not have the same issues as the US. It's a weak argument that could set off panic in the marketplace.
  11. Ludwig von Mises from Canada writes: Faced with the prospect of buying a home in Calgary in early 2007, I did a quick scan of the market out there and made the easy decision to continue renting while accumulating precious metals. Widely seen as foolish in a city where every talking head associated with real estate was pimping home ownership and projecting double-digit price increases, it looks like my decision will pay off quite nicely. Got gold?
  12. b me from Beantown, Canada writes: Rick Antonowicz,

    If the Canadian housing market could be put in a tailspin by this report, it seems a little unstable, no? If the Canadian market is robust as you indicate, i.e. vastly different than the U.S. market, why the concern?
  13. Kare Feld from Canada writes:

    the most a cross Canada correction would be is about 3 to 5% hardly a sharp decline... You renters are suckers still.
  14. Johnathyn Winters from Canada writes: Ludwig ... you bought gold at its highest time last year ... you will be 1 for 2. I like sudhir's comment.
  15. Binder Dundat from Toronto, Canada writes:
    Rick A:

    Is it OK for the Globe and BMO NB to report on GOOD news in real estate, which could set off a rash of silly purchase decisions?
  16. Kare Feld from Canada writes:

    There is NO sub prime mortgage problem here. So even with a correction people will still be able to afford the Mortgage. So you folks who think you are going to see a 20 to 40 percent drop are completely dead wrong. And even if it was to happen, people will just hold on to their homes and wait for the market to correct. Bottom line is, if you havent bought yet, prices are still going up overall.
  17. Bobby the K from Bogarttown, Canada writes: < The other deal is that a great many people are 'over housed'. Parents and a couple of kids in a much bigger dwelling than they need. And for some reason they keep building them. I guess the price of houses will drop as there is a glut. But the price of energy is going up, way up if Cheney/Bush decide to invade Iran. How much will it cost to heat a Mc Mansion next winter? How many 'good' jobs will still be available? If you have property, would it not be wise to sell and scale down now? >
  18. Patriots in 2008 from Toronto, Canada writes: Here here Thernan Riekal. I've been looking to upgrade to a larger condo in Toronto as well and I haven't seen prices go down whatsoever. In fact, I think prices are still going up up up! But for what you get for your money, it's all been too rich for my blood.
  19. Ludwig von Mises from Canada writes: Actually Johnathyn, I never mentioned when I bought my PMs. If you're interested my major purchase of gold last year was in June and I bought a lot of silver in the fall. I'm expecting late summer 2008 to present another great buying opportunity but if I miss another big run up I don't really mind, my portfolio is about 70% PMs and of course I am 100% debt free.
  20. j wilson from vancouver, Canada writes: Ludwig, you've already paid five figures in rent and bought precious metals.

    How you did all depends on how far the real estate market in Calgary falls and when you sell those metals.

    We could be looking at your post in 10 years saying you should have listened to 'everybody.'
  21. deep breaths from sunny Vancouver, Canada writes:

    I watched as people believed that they needed 'to get in' before it was 'too late' out here in Vancouver.

    It turned into Sunday night ebay style bidding that went 10-20% over the listing prices!

    Interest rates will inch up and values tick down... then we will see the flood gates open!

    Have you seen how many cranes are in the air out here in Vancouver? I have the feeling I am going to be buying the place I have always wanted by 2011! Sorry to all my friends that just bought at the end of the tail.
  22. Ron Paul from Ottawa, Canada writes: People still don't get it. Listen to Ludwig Von Mises and buy gold and silver. I did. It's still EXTREMEMLY cheap in relative terms and it's only a matter of time before one won't be able to buy any precious metal regardless of price. Canada will follow a similar path to the US. I think this is the first article that actually mentions how we are about a 2-year lag, which is correct. The real estate issue is just a symptom of a wider problem. Advocates of sound money and Austrian school of economics understand that the coming economic crises will make the Depression of the 1930's look like a cakewalk. All fundamentals are pointing to a hyperinflationary depression (at least in the US) where there will be a period of hyperinflation then a period of massive deflation. Sell all your paper assets and buy gold and silver bullion and keep some cash on hand. Don't trust banks. They will start to fall like dominoes in the next year. Mark my words.
  23. Power Glide from Canada writes: When prices are a-rising, you need to be in the most expensive house you can afford, leveraged to the nines. Because 20% of $500K is more than 20% of $200K. But just before prices fall, you dump the high-ender for a cheap dump in the slums, sit on your cash, and wait out the storm.

    I've done that several times now, and it's amazing how much I've made that way.

    I'm moving to the slums this summer - probably be there for a couple years. Not looking forward to it either!
  24. CallofDuty . from Toronto, Canada writes: woohoo...I have been saving awhile these idiots bought into the so called 'hosuing-boom'. I can wait to get a big a** 4 bedroom house for a price of a 7-series BMW.
  25. d kozak from Canada writes: Can someone explain to me if the average house price in Canada is $400,000 and the average income is $30,000 how the banks get people into homes?

    My immediate family is so lucky to live in Montreal where you can afford to live on a Canadian salary.

    Who knew Quebec would be such a positive experience for so many lucky Canadians?
    dak
  26. John the Pragmatist from Vancouver, Canada writes: Kane

    I don't know about other places in this country however history in Vancouver proves you to be completely dead wrong. The average correction here of the past four since the mid-seventies has been roughly 28%, which, incidentally, wipes out almost 40% appreciation.

    While history does not repeat itself exactly, it always ryhmes. Maybe you are not old enough to appreciate this or like so many in denial you have a short memory.
  27. Yvonne Wackernagel from Woodville, Canada writes: 'Kare Feld from Canada writes: Dream on buddy, not going to happen. All you Sivs should have bought 3 years ago like I did, even with a correction I'll still make dough. Remember its only a loss on PAPER, so if the market dips for a few years nobody is going to be giving away their house . ' I hope you are right, but I KNOW that you are wrong. It is not only in the U.S. that the housing market is correcting. In Britain, it is just as bad or worse and in Japan people are committing random acts of violence because of the collapse in the housing market. It takes about a year for Canada to experience what is happening in Britain and, if you check out the Banking system in Britain right now, it is on the verge of collapse. In Canada, the TD is the only bank that has not suffered severely from the subprime mortgage crisis in the U.S. And, please do not say you were not told: Beware of false profits! Check out the financial wizards who have and are still making a steady realistic profit on a stable basis. Think for yourself! Be aware of what is happening in your province. In Ontario and Quebec, there is more downside than upside in the foreseeable future. Stop fooling yourself. AND I HAVE NEVER BEEN A PESSIMIST!
  28. scott thomas from Canada writes: Tracking is one of the most superficial ways of predicting anything, and if this is as good as the BMO gets, then I would suggest that everyone sell their stock. It would make more sense to look at the fundamentals, for example: US banks lending on an institutional scale mortgages to people who can't afford it, causing a subsequent collapse in the ABCP market. Has this happened in Canada, delayed by two years? No. The Canadian real estate markets are slowing for other and variable reasons. The real question that I have not heard a satisfactory answer to is, why did BMO buy all this ABCP? Because they never looked below the tracking to the fundamental problems beneath? There has been only one of Canada's big five that avoided this fiasco, and I wonder if it was intelligent management, or just dumb luck. Would anyone from the TD Bank be willing to answer that?
  29. ROBERT FERGUSON from Oakville, Canada writes: Bring it on. I hope prices drop further so that they reach a level of affordability whereby the average Canadian family can pay off their mortgage in a reasonable time and not sell their souls to a housing market that is way out of control.
  30. Sunil Singh from Toronto, Canada writes: Ah... you gotta love the doom and gloom comment section of the globe and mail.

    I think what most people here fail to realize is that 99 % of people will go on living in their houses and could care less about these predictions. Even if prices do drop, most people have made more than enough appreciation already to be concerned about a small drop.

    But I'll join in anyway just for the fun of it - AHH!! THE SKY IS FALLING!! EVERYONE KEEP RENTING AND BUY GOLD!! WE ARE SO SMART WE ARE!!!
  31. Jim Somerville from Ottawa, Canada writes: Robert Shiller, Yale economist, states that home prices just track inflation over the long term. There's a lot of data to back that up. Any deviation from that trend will eventually correct. This article says that the average increase has been 129% over 10 years. That reflects yearly compounding at between 8 and 9 percent. At 3% yearly inflation, those houses should be up 34% in 10 years. At 4% inflation, those houses should be up about 50%. As you can see, there is a lot of room to correct. The only issue is how the correction is going to occur. Long and slow with flat prices for a long time (allowing inflation to catch up), or a quick dramatic drop, or something in between?

    http://himmicane.blogspot.com
  32. Kman Willi from Canada writes: I'll try posting for the second time...

    Call me stupid, but Canada does not have a sub-prime market? All my friends in the US got 25 year mortgages at 5%. They are locked in!

    What do Canadian banks offer the masses? 5 year or variable rate loans! You want to see Canadian sub-prime mess, wait a few years when all the rates set to increase... when banks have to raise rates to 'try' to stave off inflation... Will make the 80's look like a cake walk.

    As a home owner.. it sucks.
  33. Super Farmer from Canada writes: Buy a place and live in it for at least 8 years and you will see an increase in the value of your home EVERY TIME! Even if you buy at the top and the market corrects in the short term.

    And to those waiting for a 40% drop, have fun renting. A correction here will be in the single digits.
  34. Yvonne Wackernagel from Woodville, Canada writes: 'Sunil Singh from Toronto, Canada writes: Ah... you gotta love the doom and gloom comment section of the globe and mail. I think what most people here fail to realize is that 99 % of people will go on living in their houses and could care less about these predictions. Even if prices do drop, most people have made more than enough appreciation already to be concerned about a small drop.' Well, you may not remember 55 years ago when General Motors went on strike for five months, just a small thing now, but at that time you could pick up houses for a quarter of the price in Oshawa, people just walked away because they were so far behind and could not get refinancing. YOU CANNOT DEPEND ON THE FINANCIERS AT A TIME OF A DOWNTURN and the Banks EVERYWHERE at this time are 'recoiling' because they are in a mess from greed. Only the people without debt will survive. I predict that in three years time there will be anarchy in the western world particularly because corporations and governments have become so big so fast that they are unwieldy and grossly inefficient and it cannot be remedied in a short timespan. WHICH MEANS that even if you are comfortable, your children or even your grandchildren, or your friends' grandchildren, will find progress in their daily lives to be very difficult. Get your heads out of the sand. Check out what is happening IN THE WORLD, not just in Canada or North America.
  35. slapdash dapoint from trawna, Canada writes: didn't the G&M run a story yesterday in which TD said essentially the same thing...?

    and didn't pretty much everyone who had been looking to buy for the past 18 months agree they had seen it coming last summer/fall....?

    why don't the banks get together and release a report, saying, yes, the price of gas is higher today than it was this time in 2006?

    groundbreaking.
  36. god bless canada from Canada writes: quick sell your homes now . then you can pay the same for rent as you did for your home .this bmo person is a nut job.a home is not a investment it is a home a place to live and raise you family i paid 167,000.00 to build my new home 5 years ago now the price of my home is 359,000.00 in my mind its not worth that much but even if the market drops by 53% i will not lose anything as i still need a place to live and would be paying the same amount in rent
  37. Ed Long from Canada writes: A two year lag behind the U.S.?

    What's new?

    My whole life, Canada has lagged the U.S. by one to two years.

    The only variable will be the depth of the drop.

    As an investment, it means flip money is gone.

    Long term and speaking of your home, would you rather be paying sky high rents?
  38. Kare Feld from Canada writes: Sunil Singh from Toronto, Canada writes: Ah... you gotta love the doom and gloom comment section of the globe and mail.

    I think what most people here fail to realize is that 99 % of people will go on living in their houses and could care less about these predictions. Even if prices do drop, most people have made more than enough appreciation already to be concerned about a small drop.

    But I'll join in anyway just for the fun of it - AHH!! THE SKY IS FALLING!! EVERYONE KEEP RENTING AND BUY GOLD!! WE ARE SO SMART WE ARE!!!
    ___________________________________________________________

    Good post, this is exactly what I was talking about several posts back.

    1. There is NO SUB PRIME Problem in Canada.
    2. If there is a correction(drop in price) people will just wait it out, cause there is no panick to sell.
    3. People who believe there is going to be a 30% drop in price are insane.
    4. If you havent bought already you need to save 25% for a down payment or you will be ripped off in CMHC fees.
    5. Suckers who put 5% down are buried in Mortgage for life.
  39. L'actualite Conservative from Scarborough, Canada writes: CANADIAN GRAVITY GETTING WEAKER?

    BEARS MOVING OUT OF THE WOODS?

    SHIMP BECOMMING JUMBO?

    GLOBE & MAIL MERGING WITH TORONTO STAR?

    BROWN THE NEW BLUE?

    END IS NEIGH?
  40. Kare Feld from Canada writes: Realestate is a GREAT INVESTMENT. As long as you plan on renting it out for a long period of time or living in it..

    Renters are suckers for sure, unless they are making the same amount monthly in rent through precious metals, which is very doubtful..

    On average R.E. appreciates 12% per year in Toronto(overall 25 years)
  41. Kare Feld from Canada writes: For first time buyers!!! Conventional Mortgage is the only way to go if you want to make money!!!!!!!!!!!!!!!!!!!!!!!!

    Or you will be financing your CMHC fees, thats insane.
  42. Piccolo Voce from Poor Transit, Ontario, Canada writes: Why is that sage retirees typical downsize homes when their incomes get smaller?

    Could it be there is a direct correlation between incomes and housing values.

    We haven't seen material changes in Canadian disposable incomes. Layer on energy and food inflation and disposable incomes are likely getting less.

    Expect housing prices to reflect realty and if they don't just think of the UK, Spain & the US.

    The degree of the adjustment is a function of how out of whack incomes are with housing values.
  43. Comments closed, censored, deleted or made to disappear from Canada writes: '... tracking ... with two-year lag... ' -- That is commonly known as leadership.
  44. Kare Feld from Canada writes:

    Folks, 20% of the people make 80% of the money. Sorry about that.

    Canada only accounts for about 2% of all the Worlds Money..

    If you want to make money look to the far East and come up with a great idea you can sell Asians, product, service...

    I love money, and money loves me!!! YUMMY!!!
  45. MA ma from OTTAWA, Canada writes: What's the difference between paying rent or buying a house? you still don't own the house. You buy a house you pay a mortgage, the house belongs to the bank. The advantage to renting is that you can claim your rent on your income tax (In Ontario you can I don't know for others provinces). House prices are too high. I have a very good paying job and I still can't afford to buy a house, unless I want to eat Kraft Dinner for the rest of my life.
  46. W G from Canada writes: What's with all this 'buy gold and silver' crap. Gold and silver are commodities just like anything else, except they have no real practical purpose. 7 years ago, gold was $200/oz and had hit bottom precisely because it had been dropped as the standard and aside from a few niche industries, had no real economic use. What makes you think that now is any different? Gold is and has been just as volatile as the real estate market, so its hardly a safe investment like some people here believe. Paper, gold and real estate are exactly the same, i.e. they're only worth what someone is willing to pay for them.
  47. Kare Feld from Canada writes: What's the difference between paying rent or buying a house? you still don't own the house. You buy a house you pay a mortgage, the house belongs to the bank. The advantage to renting is that you can claim your rent on your income tax (In Ontario you can I don't know for others provinces). House prices are too high. I have a very good paying job and I still can't afford to buy a house, unless I want to eat Kraft Dinner for the rest of my life.
    Posted 27/06/08 at 3:19 PM EDT | Alert an Editor | Link to Comment
    ___________________________________________________________

    What? you may want to consult an accountant, you can only claim business rent, not personal living. Keep saving and one day YOU will be able to afford a house. Also by buying a house is a GREAT way of forced savings, in the end you have something. good luck.
  48. Deeply concerned citizen from Great White North, Canada writes: Maybe it will go down, but unlike gravity, in the world of real estate, what goes up generally keeps going up. and in the case that it does go down, well, it'll move back up again eventually. so no worries here.
  49. Jimmy Fish from T.O., Canada writes: My uncle quit his professional job in Alberta last year, and bought a C-Store/Gas Station/Car Wash in AB.

    Although I hate the guy's guts and he's so arrogant, he predicted that there would be a housing slump in 2008, and looming layoffs across Canada (including Alberta) in the upcoming future. That;s why he bought this business and quit his day job.

    Now the bugger is making more money than before.
    This guy is on to something.
  50. kevin o'connor from toronto, Canada writes: Main difference is no crazy mortgage plague as in the US. Some, ut not as much. So you don't have nearly the number of people who NEED to sell, nor the foreclosures.
    However, if the whole economy goes nipples up becuase of the contagion of the credit crisis and the possible bursting of 25 year old fantasy financials bubble, then all bets are off.
    What i mean is if we really do have to pay off all our individual debt, and all those wonderful new financial products are worthless pieces of paper then damn, soon we might all be livin in shacks down by the river
  51. Jimmy Fish from T.O., Canada writes: Those frugal folks who shopped at discount stores, eat in bulk, lived in the same house, and managed to save a buck or two are gonna cash in big time. These people silently laughed at all the suckers who tied themselves to items that they couldn't afford.

    You will now see these people come to you and say 'Well, I understand that you paid $500K for this house, but we'll take it off your hands for say $300K'. And then grudingly, you give him and his nice wife the keys.

    As soon as my neighbour started to say to me 'Hey, want easy money - go buy real estate and flip', I knew it was curtains for the housing market. Everyone's into it.

    Imagine doing the opposite of what everyone else does. Might end up becoming rich. Who knows.
  52. bill k from Canada writes: The Canadian housing crash has started as the facts keep coming in.

    'It's a bit unnerving to see how Canadian performance is beginning to look like that of the U.S. two years down the line,” Mr. Porter said'

    you have INCREASED INVENTORY and fewer sales. Many people who bought into the bubble need to get out before the crash gets worse. You have reduced signs and for sales signs everywhere with very little sold signs. Sellers are now fighting each other to get out of this market before the crash gets worse or they lose their homes. POP......what was that?
  53. MD Kachmar from Bubbleville, Canada writes: Kare Feld -- One might be wise to consider what happened to two other clean, quiet countries a few years ago -- Sweden and Japan.

    Both saw extraordinary property booms and the inevitable gut-wrenching busts. So how big were the busts? How much did property values drop? Not 5%, 10% or even 15%. Try 40%. Impossible you say? Property prices could never collapse by 40%, right? Well they did and in fact, the bust was so painful for Japan they still have not fully recovered, some 15 years later.

    Is Canada's bust going to be similar? Who really knows. But there's one thing I know for sure.

    Something very weird is happening right now in the world economy. Case in point -- Last fall, Britain saw its first run on a bank since the Victorian times.

    Strange days indeed.
  54. Wir sind das Volk from Canada writes: Thank god I sold for my condo in TO a month ago (for a $50K profit in 12 months!) and am now renting in Calgary where prices are stupid and have to drop (downtown condos are running $600 /sq ft). The problem with this market is that the only people who can afford houses are people that already own them - I have a lot of friends in TO who look at prices and resign themselves to a lifetime of renting - and these people have decent jobs! Trouble for me is that I don't know where to invest my money in the meantime - stocks will be flat for some time; commodities? no thanks... Maybe emerging markets...any ideas?
  55. r b from Calgary, Canada writes: In the 1980's, home prices in Calgary collapsed with losses in value exceeding 50% in the worst areas.

    Those same properties today are worth at least triple their pre-crash peaks.

    A loss is only a loss, if you sell at a loss. Real estate is long term solid baby, better than gold. ALWAYS. Buy hold and prosper indeed.

    Forget stocks, where retail investors are mere sheep to be sheared, real estate is the ONLY chance for wealth that most average folks will ever have.

    Or listen to Jimmy Fish and buy from your clothes from Goodwill, eat from dumpsters, put your money in the mattress.

    When you croak you'll have the satisfaction of knowing that you lived more cheaply than those crazy neighbors who were always flying off to Hawaii and enjoying life but who died with a zero bank account. Yeah, they were the dumb ones.

    Too funny.
  56. Kare Feld from Canada writes: MD Kachmar from Bubbleville, Canada writes: Kare Feld -- One might be wise to consider what happened to two other clean, quiet countries a few years ago -- Sweden and Japan.

    Both saw extraordinary property booms and the inevitable gut-wrenching busts. So how big were the busts? How much did property values drop? Not 5%, 10% or even 15%. Try 40%. Impossible you say? Property prices could never collapse by 40%, right? Well they did and in fact, the bust was so painful for Japan they still have not fully recovered, some 15 years later.

    Is Canada's bust going to be similar? Who really knows. But there's one thing I know for sure.

    Something very weird is happening right now in the world economy. Case in point -- Last fall, Britain saw its first run on a bank since the Victorian times.

    Strange days indeed.
    ___________________________________________________________

    MD Kachmar, you make some very good points and observations. The difference is, in Canada we have the second largest oil reserves in the World, albeit its Alberta, its still Canada. Secondly, overall our economy is solid(not necessarily in Ontario), and even with a correction of 5-15%, people are not FORCED to sell here. Most mortgages are based on solid principals, no sub prime.
  57. Panty in a knot from vancouver, Canada writes: Housing costs compared to income - on average - is worse than the USA (plus their mortgage interest is tax deductable) so to say our prices are not going to drop is nuts.

    I live in a 2 person familiy with a familiy income well above the top 10% in the country and even I can't afford a nice townhouse in a decent part of Vancouver. We are not big spenders either - ride bike to work etc. I can't imagine what the bottom 90% are doing.

    I am happy to make money in the stock market (short the market now so happy) and then will buy real estate when price/income ratios come back down to earth.
  58. Johnathyn Winters from Canada writes: Ludwig and others ... most people who openly talk about thier financials usually grossly exagerate ... especially in little blogs and forums such as this. Anyone who talks about how much they made or make, to total strangers, especially on forums, are usually lying.
  59. Cowtown boy from Canada writes: Wir sind das Volk from Canada writes: Thank god I sold for my condo in TO a month ago (for a $50K profit in 12 months!) and am now renting in Calgary where prices are stupid and have to drop (downtown condos are running $600 /sq ft).

    That would put a 600 sq ft condo at $360000. Is that a month or year .... LOL.
  60. R E from Canada writes: Kare Feld..you lie. Toronto house prices do not rise at 12% per year, especially over the last 25 years

    That would mean a $500K house today would have sold for less than $30K in 1983. Horsesh!t.

    Have a look at this chart.
    http://www.randi-emmott.com/market.htm#avg%20price%2080-99
  61. Uncle Mike from Edmonton, Canada writes: The comparison between Canada and US isn't valid anymore. No subprime in Canada? Well, no subprime in Spain, Australia or UK either and there's a realestate dowtown there. But we had to assign blame somewhere right? Could this be an AFFORDABILITY issue primarily and sub-prime lending merely served to expedite the correction in the US?
    It's not a bad idea to buy a house, just don't buy a house right now!
    This is a market, because of high transaction costs, that can take a while to correct but if prices drop 12% (or $50,000) that's a lot more than you'll pay in rent for a year. And that kind of correction is common right now in Alberta.
  62. Michel Frechette from Kapuskasing, Canada writes: A highly paid work force is required for there to be a strong real-estate market. When our real-estate market does collapse it'll be because high paying jobs will be in short supply.
  63. Nick T from Canada writes: Kare Feld from Canada writes: Realestate is a GREAT INVESTMENT. As long as you plan on renting it out for a long period of time or living in it..

    Renters are suckers for sure, unless they are making the same amount monthly in rent through precious metals, which is very doubtful..

    On average R.E. appreciates 12% per year in Toronto(overall 25 years)
    __________________________________________________________
    Not sure where you found your stats but over the past 25 years RE has tracked inflation. If RE tracks inflation and financing costs are always higher than inflation explain how a home is a good investment. Like sudhir jain said a home is a place to live.
  64. Kare Feld from Canada writes: Whats really happeneing in Canada folks(finally) is we are seeing the real difference between the haves and have nots. Meaning, people who cant afford a home most likely never will(assuming you are not saving large) and we will now have real ghettos vs real wealth. The problem with toronto is Mayor Miller and the Liberal social govt. Meaning the only reason we dont have American Ghettos is because of social handouts.
  65. R E from Canada writes: Kare, its becoming more and more obvious that you don't know what you're talking about.
  66. Michael Peters from Canada writes: Why hasn't anyone addressed the bogusness of Fare Feld's posts?

    First off, he (she?) claims there is no sub-prime crisis in Canada. WRONG, it's just packaged a little differently. If you look at the growth of real estate values v. growth in real incomes over the past number of years, you will see that there is a significant divergance - housing prices have appreciated much more than real incomes, on average. Why is this? A flood of cheap money and lose mortgage terms. People have been bidding up the prices of real estate because 1) 'real estate values always go up' and 2) the bogus belief that 'houses are a good investment'. So many families have gone to the banks and taken out massive mortgages with a low downpayment or have amortized them over 40 years. These dubious features increase the amount people can borrow, and heaven knows you gotta get in the market ASAP! And since prices always go up, there's nothing to worry about.

    But...what happens to all these folks with a high-duration mortgage when interest rates creep up? When the employment market isn't as rosey as it has been for the last number of years. POP.
  67. Wir sind das Volk from Canada writes: 12% a year in TO? that would mean a $100K house in 1983 would be worth $1.7 million today - actually the average price of a home in TO in 83 was about $100K and today it is $400K which is a bit less than 6% or less than the average return on a Govt of Canada over the same period. There may be rare examples in neighbourhoods like Queen West or Riverdale that have shown 12% a year but on average no. In fact in you have bought a house (or certainly a condo) in 1989, you would have been better off leaving your money in a savings account (especially since they paid 10% interest in 1989).
  68. Jimmy Fish from T.O., Canada writes: 'r b from Calgary, Canada writes:

    Or listen to Jimmy Fish and buy from your clothes from Goodwill, eat from dumpsters, put your money in the mattress.

    When you croak you'll have the satisfaction of knowing that you lived more cheaply than those crazy neighbors who were always flying off to Hawaii and enjoying life but who died with a zero bank account. Yeah, they were the dumb ones.

    Too funny. '

    Hey r b, what's really funny is the day-to-day depreciation of Calgary house prices. What's even more funny is that real estate in your sister city Edmonton is worth more than Calgary's.

    BTW if you think stocks are not the way to go, why don't you do some research and see how the historical value of the TSX has risen over the decades.

    So why don't you do us a favour and pull your stetson hat a little lower over your mouth.

    Too funny.
  69. k Pret from Van(tasy), Canada writes: Ownership is to renting as renting money (a mortgage) is to renting a home. Either way you pay to live somewhere.
    Either you throw money away on rent, or you throw money away on interest, or you throw money away by owning outright without having that money to invest. In a rising market ownership has a great return, in a flat market it depends on what equivalent rent is, in a falling market ownership is very costly. As long as you don't buy at the peak of a bubble ownership usually is good if you're stable in lifestyle. Moving is MUCH easier for renters.
    If you love your home, didn't buy recently (or HELOC out all your equity) and don't intend to move soon then don't sell now, money isn't worth the hassle. Perhaps. Make up your own mind. Do not, however, think double digit increases are normal and will continue.
    The situation here and now looks like the peak of a bubble, good time to dump investment property, bad time for first time buyers, irrelevant to those happy living where they are. The market is only affected by those active in it, everyone else can ignore it.
  70. R E from Canada writes: Well, Michael Peters, several of us were pointing out his made-up stats. But you stay on him about the subprime stuff and we'll wait for a reply to the bogus 12%-over-25-year nonsense.
  71. Back to the Future Past History from Calgary, Canada writes: Piccolo Voce from Poor Transit, Ontario, Canada writes:The degree of the adjustment is a function of how out of whack incomes are with housing values. ---------------That is true, however most prior stats are in a low oil world. So the question is : 'Is Real Estate a winner or a loser in a high oil world? ' and 'Is Real Estate a winner or a loser in a high inflation world? The answer is both. Real Estate that ADAPTS well will do fine ( close to work, transit, food and energy sources) and the opposite will fall ( Think GM Truck manufacturing, and far away suburbs with two car garages). Best Real Estate advice: Live near where you work.
  72. Is there anybody out there? from Canary Islands, Canada writes: Pull up a chair to watch the lemming jump show
  73. M M from Canada writes: The Bank of Canada wrote a research paper a year ago that indicated that the Canadian housing market usually lags the US by 3 years. I doubt the BoC would want to report this fact, but I am sure they are concerned about it.

    Here is a BoC quotes
    'We find that North American housing cycles are long, averaging five years of expansion and four years of contraction, and there is a fairly high degree of correlation in house price cycles between U.S. and Canadian cities. '

    Leverage is wonderful thing when prices are stable and rising, but one little disruption and it could kill you. Read about the Minsky moment.

    Here is the link to the BoC Report
    http://www.bankofcanada.ca/en/res/wp/2007/wp07-2.html
  74. Michael Peters from Canada writes: R E - My bad, missed those posts.

    I'm not sure we'll see the return of Kare on this thread...hopefully they're too embarrassed.
  75. Don Quixote from The sunny hot and humid Pollution Belt, Ont., Canada writes: Unless we get warfare in our streets similar to Iraq, housing prices will in time go higher, basically following the inflation of everything else.

    With prices going up inflationary, it does not really mean that your value goes up, whatever shack or palace you may own.

    After 1982 and also 1989 real estate prices took quite a drop, recreational properties even dropped faster and more - until inflation was under control again and your income earned something again.

    Right now it's the beginning of the panicky ratcheting time again, slightly deferred from what drops in the U.S. housing market, but never the less quite similar

    - So new buyers or potential rental escapees: Be alert, in half a year or so bargain buying time starts again, just watch the 'For Sale' sign forest grow.....
  76. scott thomas from Canada writes: R.E. thanks for the link to housing prices in Toronto charted over the past thirty years. The one thing that the chart doesn't do is adjust by inflation, and there you would see that house prices in have just passed their late eighties peak. One difference between now and then: interest rates are at historical lows while then they were at historical highs. So the cost of housing is still substantially less. We have a long way to go before conditions in Toronto repeat a collapse. And, I would like to repeat, the Canadian real estate market is by no means homogenous. There are other reasons for real estate moves in other markets.
  77. Kare Feld from Canada writes: R E from Canada writes: Kare, its becoming more and more obvious that you don't know what you're talking about.
    __________________________________________________________

    My statistics slightly flawed, but im big enough to correct myself. (google it)
    13% per annum over 25 years(on AVERAGE)..
  78. Kare Feld from Canada writes: I was talking North York sorry about that, im not trying to lie..

    The bottom line is

    1. the correction (minimal)
    2. No Sub Prime problem.
    3. If you dont own a home RE, your a flake.
    4. RE. Money talks Bull sh*t walks.
    5. I own over 6.7 million dollars in Real estate
    6. Not to brag.
  79. R E from Canada writes: Michael - he's back - and saying he was UNDERSTATING the rate of appreciation of Toronto real estate. I can only assume he did not refer to the Toronto Real Estate Board data that I posted (which is also easily available with a simple google search from many sites).

    I suppose if we wait another 5 mins it will be 14% per year.
  80. Kare Feld from Canada writes:

    Do you own a home RE?
  81. Max Webster from Canada writes:

    Kare Feld is correct about North York over the last 25 years appreciation at 12-13 percent per annum. Obviously some years better then others..
  82. Michael Peters from Canada writes: Kare Feld - you own $6.7 in real estate? Good for you. Are you levered, or do you own your properties outright?
  83. CallofDuty . from Toronto, Canada writes: Kare Feld from Canada writes: I was talking North York sorry about that, im not trying to lie..

    The bottom line is

    1. the correction (minimal)
    2. No Sub Prime problem.
    3. If you dont own a home RE, your a flake.
    4. RE. Money talks Bull sh*t walks.
    5. I own over 6.7 million dollars in Real estate
    6. Not to brag.
    -----------------------------
    Yeh no subprime problems. I don't think the over inflated prices of food/gas is going to effect the housing market either. And yes, you are bragging so please /Yourself.
  84. Kare Feld from Canada writes: Michael Peters from Canada writes: Kare Feld - you own $6.7 in real estate? Good for you. Are you levered, or do you own your properties outright?
    ___________________________________________________________

    Most, I do have a 1.3 mllion dollar line of credit against a 12 plex I own in Scarborough. But its a home equity at prime.
  85. Winston Smith from Canada writes: I've been told Canada is different. Housing won't go bust. HA HA HA!
  86. Michael Peters from Canada writes: Kare - then you actually own your properties. Congrats. The problem with today's RE market is that few people do (no surprise there), but as I said before, there is a glut of high-duration mortgages out there that are prime for a whoopin.
  87. Kare Feld from Canada writes: Winston Smith from Canada writes: I've been told Canada is different. Housing won't go bust. HA HA HA!
    _________________________________________________________

    Fear is what stops most people from prosperity. I hear it in your post.
  88. Kare Feld from Canada writes: Michael Peters from Canada writes: Kare - then you actually own your properties. Congrats. The problem with today's RE market is that few people do (no surprise there), but as I said before, there is a glut of high-duration mortgages out there that are prime for a whoopin.
    __________________________________________________________

    Michael you are correct, except they are slightly different then SP.
    With SP(sub prime) these folks dodnt even have jobs.
    Do you know what the slogan was? Honestly it was, No Job, No Money, No Problem. The brokers just sold paper and made commissions.

    also, I must admit im just having some fun today before we head up to the cottage for the long weekend..

    Peace.
  89. Wir sind das Volk from Canada writes: I saw somewhere an interesting chart that showed R/E prices in Toronto corrected for inflation. What was notable was that apparently, correcting for inflation, the avaerage house price in the early 1960s was $100K (about $20K in nominal dollars would buy a decent house then), which means prices, in real terms, have quadrupled. Anecdotally it does appear that people of my parents generation could afford homes on fairly humble salaries. I always find it intersting that in Toronto those post WW2 bungalows, or tighly wedged semis of Leslieville were probably originally bought by factory workers in single income families. Now its takes 2 professional salaries to cover the mortgage. What has changed so much - demographics?
  90. Kare Feld from Canada writes: Before I go,

    With Sub prime mortgages(mostly sold to poor black folks) not only did they get a mortgage they got cash back. In other words the person accepting the mortgage was in on the skim. dont ffel bad for people that scammed.

    Good day, Happy long weeknd, everyone including RE :-)
  91. Michael Peters from Canada writes: Kare - the key word being 'slightly'. To ignore the potential impact of Canada's high-duration mortgage problem is to stick one's head in the sand.

    Enjoy your weekend.
  92. Joseph Whistle from Canada writes: I think all the renters, and the people eying other people's houses to take it away from them at a 40% discount, are either single, or still live with their mommy, at age 40, lol. Only 32? Lol, it's not so bad then, lol.
    Money comes around goes around. Not having money in one thing, means its tied up elsewhere. Obviously, tons of money is in oil right now, taking away from other markets. As long the money doesn't leave the country, it'll come back, you'll see. We're lucky that in Canada, we sell oil as well as buy. Hopefully the net result is that money isn't leaving Canada. Other countries that only import that commodity, will see greater problems.
    I bet you a million bucks, we will see a mild soft cushiony down dent, and it'll coast right back onwards. Just hang in there. Take care of your homes, make it nice, keep it looking like it has value.
    I refuse to be pessimistic, because we are in Canada, and Canada ROCKS !
  93. Panty in a knot from vancouver, Canada writes: the reason RE price increases have outpaced inflation over the past 25 years is that interest rates have gone down.

    When the opposite occurs, look out.
  94. Winston Smith from Canada writes: Kare Feld from Canada writes: Fear is what stops most people from prosperity. I hear it in your post.

    No fear is what kills people and destroys good