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Baby, we got a bubble!?

This exact moment of collective condo zeitgeist is precisely why I've suggested people avoid buying condos in dead zones like across from the Eaton Centre and instead focus on established neighborhood nodes where street life is vibrant, amenities are diverse and transportation is near. Frankly the whole Richmond, Adelaide, Blue Jay Way, Peter, thing makes no sense to me either. It's only 1/2 step away from building on spec as end users are not choosing these locations for the most part. As much as I advocate for and enjoy seeing gentrification occcur, I prefer the Queen West/Ossington model of artisan outpost luring curious first time buyers to an emerging spot than this block busting invasion of bland towers known to be filled primary with transient residents.

I also find the characterizarion of developers as greedy to be entirely misplaced. Developers take all the risk and in the purest sense are operating businesses. Think of them as an assembling line factory churning out widgets as condos.

Investors are gamblers for the most part and there's nothing wrong with acknowledging that obvious fact. I'm referring to those counting on turning around their gamblers for a profit as opposed to the newer breed of safe haven buyers that we've seen in the market in 2010 and 2011. The investor buyers may feed the factory perhaps but they generally don't add any real value in the chain of production.

Ultimately the role of developers is to fill the void of housing demand in the marketplace. In a slower market investors might flee but real end user demand will ultimately find its level, particularly in a growing market like the GTA. It might take a while though to absorb all the unsold inventory in the pipeline.
 
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A 40% real estate price drop would indeed be catastrophic for Canada. And it doesn't help if prices are lower if you are unemployed.
 
RocketAppliances

I get it might be great now.
At some point in the future, perhaps you will be on the other side of the equation.
I believe some adjustment is needed downwards. However, be careful for what you wish....it may just happen and not quite unfold as you envision.
 
interested said:
RocketAppliances

I get it might be great now.
At some point in the future, perhaps you will be on the other side of the equation.
I believe some adjustment is needed downwards. However, be careful for what you wish....it may just happen and not quite unfold as you envision.
Click to expand...

I'm not naive to the realities of a recession, I'm just playing devil's advocate here... there are always winners and losers

It may not happen the way you envision either
 
The safest "correction" (which I agree is needed) is a soft landing or minor contraction, allowing inflation overall to compensate vs. real estate over a number of years.

Unfettered continued price growth is a recipe for future disaster, while a massive quick price drop IS that disaster.
 
RocketAppliances said:
I'm not naive to the realities of a recession, I'm just playing devil's advocate here... there are always winners and losers

It may not happen the way you envision either
Click to expand...

RocketAppliances.
The one thing I can say with virtual certainty is based on my past performance, things will definitely not happen the way I envision it either.
I agree with Eug's comment in post #5874
 
the outlook from today is that borrow rates will remain low for the next 1-2 years. that means housing prices continue to climb somewhat (maybe not as fast as before). if the housing price starts to fall after 2 years back down to present day (2012) price. I have no problem with that.

A drop in housing market could trigger a drop in stock market (or vice versa), so parking your money one or the other in a downturn economy hurts generally everyone.
 
dlam said:
the outlook from today is that borrow rates will remain low for the next 1-2 years. that means housing prices continue to climb somewhat (maybe not as fast as before). if the housing price starts to fall after 2 years back down to present day (2012) price. I have no problem with that.

A drop in housing market could trigger a drop in stock market (or vice versa), so parking your money one or the other in a downturn economy hurts generally everyone.
Click to expand...

Not so sure I agree with the bolded part. The government is limiting CMHC, interest rates are creeping up, OECD cam out to suggest Carney should increase interest rates. I doubt he will but he may try in 2013 despite the US keeping rates low until 2014. However, evidence is that Canadians are starting to retrench a bit so I don't think that housing will continue to climb. I do not believe that 2012 prices will be the low water point for the price adjustments when it happens. I would think more 2008 if things go very badly, and maybe 2009-2010 otherwise.
 
I suspect rates will continue to be low until at least next year. And when they increase, they're not going to jump by leaps and bounds either. It will likely be a relatively gradual rise.

dlam said:
A drop in housing market could trigger a drop in stock market (or vice versa), so parking your money one or the other in a downturn economy hurts generally everyone.
Click to expand...
Only partially on topic, but it was interesting to see this post by a young guy a couple of years back looking for advice about how to convince his parents to invest. He seemed like a young aggressive stock market type of guy, but his immigrant parents had several hundred thousand dollars parked in GICs and money market funds, etc. He was flabbergasted that his parents could be so foolish to park money outside the stock market, while the market was breaching 11000, then 12000, then 13000.

Now that the TSX is back at 11500, I suspect this guy doesn't think his parents are that stupid after all.
 
^^^
It's easy to take gambles when it is not "your money".
Also, when you are younger, have your whole working career in front of you, if you lose...well you can remake it.
Believe me when retired you worry first and foremost about "return OF your capital" and then and only then about return ON your capital". An extra couple of percent return does not go far if you have 1 investment go to Zero.
 
Eug said:
The safest "correction" (which I agree is needed) is a soft landing or minor contraction, allowing inflation overall to compensate vs. real estate over a number of years.

Unfettered continued price growth is a recipe for future disaster, while a massive quick price drop IS that disaster.
Click to expand...


IMO the best case scenario is 5% depreciation annually for the next 5 years, then stagnation for another 3-5 years.
i agree, continued price growth will just make the correction worse.
 
Eug said:
I suspect rates will continue to be low until at least next year. And when they increase, they're not going to jump by leaps and bounds either. It will likely be a relatively gradual rise.


dlam said:
Originally Posted by dlam
A drop in housing market could trigger a drop in stock market (or vice versa), so parking your money one or the other in a downturn economy hurts generally everyone.
Click to expand...

Only partially on topic, but it was interesting to see this post by a young guy a couple of years back looking for advice about how to convince his parents to invest. He seemed like a young aggressive stock market type of guy, but his immigrant parents had several hundred thousand dollars parked in GICs and money market funds, etc. He was flabbergasted that his parents could be so foolish to park money outside the stock market, while the market was breaching 11000, then 12000, then 13000.

Now that the TSX is back at 11500, I suspect this guy doesn't think his parents are that stupid after all.
Click to expand...

Hi Eug, when you said "this post by a young guy" and then quoting my post just above that, you're not talking about me right?

Anyways, during the financial crisis, housing prices went down, same with stock market. all i was saying housing and stocks are not mutually exclusive
 
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