News   Apr 18, 2024
 158     0 
News   Apr 18, 2024
 1.4K     3 
News   Apr 18, 2024
 359     0 

Baby, we got a bubble!?

"If incomes climb eight per cent and prices stabilize, as I expect, the current overvaluation would fall to six per cent, hardly the stuff of corrections".

What I want to know is where these real estate agents are pulling the 8% number from? Are they high?
 
Did you really quote Garth Turner? Fail.

Eug, if you note what I wrote, I was using him for the objective data for the Richmond market assuming it to be true.

And yes, eventually what he is saying will be proven correct. I would agree that 10 years after the fact or whenever makes it wrong or useless. That a market cannot exist with average prices over a $1 mill when the income is $87K, or at the very least be indicative of a "normal" healthy market I think we would agree upon.

Garth gets a lot of things wrong. He predicted in the past that real estate would boom just before it crashed in 1989 as I recall. If I am wrong, my apologies to him. I believe he was part of the group telling people to take equity out of their home before the dot com bubble in 2000 burst. Again, if I a wrong, my apologies to him. My point is simply that if the objective data is right, this could and I emphasize "could" be the first sign of cracking of at least this one market. More data is needed but worth watching the data.
 
IT,

No need to apologize :)

I think we're saying the same thing. But so much of the talk about RE prices seems to get caught up in these ambiguous terms such as "crash", or "correction" or "hard/soft landing".

I continue to expect a correction of 20-30%, but a more limited 14% correction is certainly possible. But I think that even that 14% in real terms over the next 4 years, would have a devastating impact upon our market. I find the psychology of how this bitter bill is being presented via various sources to be absolutely fascinating. Most people just don't really understand real vs nominal price changes, nor the effect of nominal price changes or lack thereof relative to nominal incomes.

As far as a EUG's "fail" for your quoting Garth Turner...

I feel badly for Garth Turner, I think he's being given a bum rap.

I think he was 100% accurate in his 2008 "call to arms" about Canadian real estate. Unfortunately for him, his estimate ran up against some unprecedented and impossible to predict government intervention in the markets.

But having said that, I'm increasingly disappointed by the rabid ignorant masses that he allows to populate his greaterfool.ca blog. That cacophony of idiocy over there really drowns out what originally began as an important and informative dialogue.
 
Thanks dave,

I agree there is so much "social engineering" and "vested interests" that the party will be continued long after everyone should have gone home to rest.

Of course, it just means the hangover will be that much worse.

Whether 15% or 25% down or stagnation of the same amounts over the next 5 years or so is not the issue in my view. It is that at the "round table discussion"
the 3 real estate agents, the 4th Brad (realtor/developer) all say up. Even Brad is being more honest than the other 3 when he says valuations of investment are questionable. Whether the other 3 truly believe this, or they truly see the outcomes they predict, they may be dealing in a skewed market. Elli Davis, Elise Kalles and Barry Cohen for the most part deal with the upper middle if not upper market. I am not sure that is representative of the whole market or can lead to the generalizations of what is being concluded. I thought it was telling that Elli Davis mentioned she had not been seeing multiple bids on condos as in the past. I do believe she is correct that there may be a schism forming between the housing vs. the condo market.

However even the most optimistic and those with the most to gain are saying "in between the lines" be careful with investment condos. Harry says it clearly, Brad eludes to it, and Elli tells you the froth may be coming off in that she is not seeing bidding wars (which means the first step to a possible slow down).

I agree Garth may have a bad wrap given the social engineering but at some point one has to come out and explain that this is why it is happening and admit that if one has called for a correction for the past many many years, that while the thesis may still be correct, one was sadly wrong with the timing which was at least to date the wrong decision. I guess I have sympathy because I too felt and still feel we need to retest the 2008/2009 figures or at least wait 5 years with no growth (negative real growth in prices) to put housing back on a more solid footing.

As for the question would I advise my kids to buy now. Answer simply would be "NO" unless they got an assignment giving them 2-3 year ago prices.

The part tha tbothers me however is that I am going to be called upon as a tax payer to finance all the 5% down that most recently happened for something that I would never have done myself viewing it as too risky an investment. No pain no gain, I get but I don't appreciate acting responsibly only to have to pay for the actions of those who don't.
 
Turner's agenda is to sell books and find speaking gigs. He does that by trying to be sensational. His central theme is benignly accurate but he is surely the wolf who cried boy.
I remember reading his blog early on in the 2008-2009 housing market correction. What did mr doom and gloom do with his money? He bought a recreational property for personal use. Meanwhile he was predicting a total collapse.

Lesson is draw your own conclusion and try and filter out the noise by conflicted voices.
 
Turner's agenda is to sell books and find speaking gigs. He does that by trying to be sensational. His central theme is benignly accurate but he is surely the wolf who cried boy.
I remember reading his blog early on in the 2008-2009 housing market correction. What did mr doom and gloom do with his money? He bought a recreational property for personal use. Meanwhile he was predicting a total collapse.

Lesson is draw your own conclusion and try and filter out the noise by conflicted voices.

Garth has often openly admitted to owning real estate. He doesn't see a problem with it as long as real estate investment doesn't take up a large proportion of his investments. It's about risk and diversity. You wouldn't put all your money in one tech stock, even if it's AAPL.
 
I see 2 issues and believe that CN Tower and kenny you are both right.

1)If Garth truly believed that a "total collapse" would be coming, then one could only be judged as "not smart" for actually buying real estate.

2) That said, there is a difference between investment and personal use real estate. One can make a decision not soley based on the "investment" side and conciensciously make a personal use investment. That said, if one truly believes postulate #1, it is still questionable but perhaps reasonable to still do depending on one's priorities.

3)I agree with Kenny's point about risk and diversifying one's portfolio.

This is clearly demonstrated by the fact smart people may make correct decisions more often than not, but even so, unless you always get the decisions right, you are going to risk bein wiped out if you make ever increasing bets assuming that your past successes will always be repeated.

the reality is however that I suspect a fair amount of the "condo investors" with minimal money down by virtue of the fact that should the market turn and they find themselves in a negative equity position will by birtue of having to close the property and have a mortgage (perhaps 80-85% or more of value) will automatically have most of their assets tied up in real estate, whether that was their intent or not. And these weaker investors, those at the margin, will be those who ultimately risk exposing the soft underbelly potential of a real estate price adjusment.
 
The truth is he's a troll. He is being sensationalist in order to get attention. I'm not sure if he started out that way, but he most definitely is now, and has no credibility.

So again. Quoting Garth Turner = insta-fail.
 
Eug,
Just a comment. He may be a troll but do you not think that in order to get heard in the sea of "everything is wonderful in lala land" that to make a point you have to be a bit on the fringe. That said, I agree he is over the top, sensationalist and unfortunately does not have a very good track record if my data is correct.
 
Just a comment. He may be a troll but do you not think that in order to get heard in the sea of "everything is wonderful in lala land" that to make a point you have to be a bit on the fringe.
Not at all. Just a quick perusal through the papers will net you lots of articles predicting a pullback...

Hell, even the real estate PR people aren't completely bullish on real estate these days. They are claiming real estate will rise, but very slowly... which means anyone slightly less optimistic than them might be predicting flatlining, and anyone moderately less optimistic than them might be predicting a modest pullback.
 
The less optimistic people have been a phenomenon in the past 2 years only. Prior to 2008 they were scarecly heard. I think he has just continued on the same path, having been sensationalistic before to get people to listen. That said, I agree with you that he really wants to sell books and predicting mediocrity doesn't get you noticed from all the rest.
 
I remember reading his blog early on in the 2008-2009 housing market correction. What did mr doom and gloom do with his money? He bought a recreational property for personal use. Meanwhile he was predicting a total collapse.
The reality is that no matter if you're a RE bull, or bear, life goes on. He does pretty well, I think, and if you do the math and can bear and accept the risks, then you may as well enjoy the ride.

The concern is not some millionaire blogger who can comfortably absorb losing a few hundred grand on a cottage or whatever. It's the stretched family who will likely be financially destroyed were there to be a correction. They're the ones with much to lose.

You kind of lose sight of that on this board. I think most people reading this are fairly well informed, aware of the risks, and able to accomodate either way. We are not the ones that will lose everything if things go south.

I don't own real estate. I'm quite content to rent, I'm young and on contract work and want to be mobile. Yet, here I am throwing cash at the stock market. Bad idea? Probably. I realize that the gains last fall won't be repeated and there's significant downside risk. But I'm in a position to wait out a correction, not sell at the bottom, etc. Even if I do lose it? It's 15 thousand bucks. A not inconsiderable sum, but losing it won't be the end of the world. The same is true for most canny real estate investors.

Not everyone thinks about it that carefully though. The guy on the street is generally not aware of the risks or consequences. He's the one who will be hurting, possibly bankrupt, if prices drop or rates rise.
 

Back
Top