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Getting confused!

M

munmun

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Hello. I am a potential first time buyer. I am aiming to buy ahead of the new mortgage restrictions. I probably will never be able to buy again if I wait. I believe that real estate is the most sound investment one can ever make. Prices have not gone down and never will. Canada is very different to the US and the rest of the world. We have sound banking and lending compared to them. Urban space is limited. Immigration is huge. The Chinese are buying in. Affordability is at a great place. The consumer is financially healthy and the economy will grow. So I have made my decision to invest my minimal savings into real estate with a 35 year amortization before the rules change. I will ride this investment and bank on it for retirement.

However I am getting confused by some advertising I am seeing from realtors. For example one in my area has put out an ad saying that it is a great time to buy (given mortgage rule changes) and a great time to sell (because prices will fall after rule changes). While I strongly disagree with her comment about prices ever decreasing I dont understand the logic around why it would be a good time for me to buy now if prices might decline in the future (even if I only get a 30 year amortization).

Can someone help? Am I missing something?
 
I disagree with this site. Prices are seasonal. Therefore one cannot compare from one month to the next. The only valid comparison is against previous year. On that basis the Canadian market still has performed in stellar fashion despite meltdowns everywhere else. In other words, our market has shown resilience no matter what happens. This market is different.

I came here for an explanation around negative realtor comments about the market- not to defend a foregone conclusion- namely the strength and future growth potential of Canadian real estate in my lifetime.
 
munmun said:
I came here for an explanation around negative realtor comments about the market- not to defend a foregone conclusion- namely the strength and future growth potential of Canadian real estate in my lifetime.
Click to expand...

Now I know we are being Punk'd.
 
I came here to ask a realtor a question. If there are no realtors here- I will go elsewhere.
 
munmun said:
... In other words, our market has shown resilience no matter what happens. This market is different.

I came here for an explanation around negative realtor comments about the market- not to defend a foregone conclusion- namely the strength and future growth potential of Canadian real estate in my lifetime.
Click to expand...

boy, i've heard this before ... any more famous last words ?!?
either we're being punk'd, or you're a naive first-time buyer who has drunk the RE industry kool-aid !


munmun said:
For example one in my area has put out an ad saying that it is a great time to buy (given mortgage rule changes) and a great time to sell (because prices will fall after rule changes). While I strongly disagree with her comment about prices ever decreasing I dont understand the logic around why it would be a good time for me to buy now if prices might decline in the future (even if I only get a 30 year amortization).

Can someone help? Am I missing something?

....I came here to ask a realtor a question. If there are no realtors here- I will go elsewhere.
Click to expand...

if you can't see that the realtor is working both sides of the deals, then you're really naive.
prices are definitely going to go down after the rule changes because it will limit the amount of capital, just as the opposite did when rules were relaxed it opened up more capital.
the rule changes will decrease liquidity by 8%.
 
Can someone please recommend a site where realtors will take questions from the general public. This site is over run by Garth Turner shills.
 
munmun said:
Can someone please recommend a site where realtors will take questions from the general public. This site is over run by Garth Turner shills.
Click to expand...


no, not Garth Turner shills ... but we're definitely not RE shills who blindly agree/believe what the industry says.
we're just people who are able to do quantitative analysis and think for themselves, able to take into consideration all the different variables;
not just take the experience of the last 15 years when interest rates have declined from almost 20% to 3.5% for 5-year fixed terms;
the loosening of CMHC rules from lowering of down payment (DP) requirements and extension of amortizations from 25 years to 40 years;
broadening of the 5% DP minimum beyond first-time buyers to include specuvestors;
and many other things including price-to-income ratio that is currently ~5x vs. historical average of 3.0-3.5x;
stagnate incomes for the past decade;
price-to-rent ratio that is currently 200x vs. historical average of 120x;

... anyone want to add something i may have forgot ???
 
munmun said:
... Prices have not gone down and never will. ...
Click to expand...

Not true, and even a minimal amount of research would show you otherwise.

On the off-chance that you are a serious enquirer and not a troll: Before talking to a realtor, have a good talk with a bank lending officer, then have another good talk with a mortgage broker. Get into the numbers (your proposed price range, your income level and job stability, what monthly payments you would be commiting to including utilities, property taxes, and, if applicable, condo fees). Work out the numbers based on current 5-year rates. This is what a lender will do, whether you are actually taking the 5-year term or not. Then work out the numbers again, assuming a 2% increase in mortgage rates across the board. After all that, if it still makes sense, talk to a realtor.
 
Wow... poor munmun....

Observer Walt is right though about looking at the numbers. The longer amortizations simply results in paying more interest. If you are putting only 5% down, you will need to pay the insurance premiums too... So the reality is that to realize gains you would have to recoup the price paid with the CMHC insurance premium, all transaction fees you will incur, and with a 35 year amortization you won't be paying down the principal very rapidly... it may be a while before you will be able to sell and realize gains. You should be evaluating the use of your money based on forgone benefits.. ie invest in real estate vs. renting, vs. saving vs stocks etc... There is no sure thing when investing.... Real estate is often considered safe because of the limited amounts of land but if you are not able to hold onto the units and sell when its in your favour you can lose! I invest in real estate but not with the expectation of turning profits in the short term. That said, what should you do? Well I can't tell you.. but the reality is it sounds like if you are considering purchasing now, given the limited information you provided, I would expect that you would need to stay in the unit for several years or you should buy a place in a price range that you can afford with a higher % down and lower amortization.

I am not a certified specialist in anything... but thats my 2 cents..
 
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