gei
Active Member
When the prices "drop significantly" all these thousands of people holding out on buying properties (of which I know dozens) will go on a frenzy, and will push prices back up.
|
|
|
Why the housing market is not set to melt down
- Thread starter MADEinHK
- Start date
Urban Newbie
Active Member
If prices DO drop dramatically, I hope to buy my first home (not a condo). That is, if I haven't been laid off 
TrickyRicky
Senior Member
Gei, I wish that you are the correct one. If your belief is so strong buy into the market and prove us concerned folk wrong. But I'll say it again, not one single mortgage need default and we are still heading down. How far down? We will see.
Also, for those wishing to buy if the market drops, it may not be as easy as it seems. Wealth is rather more relative than it is absolute. If you could buy before but strategically chose not to that is one thing, but if you couldn't buy before and are hoping to pounce it is likely that your capacity to buy will sink in parallel on a relative basis. Falling asset prices will be offset by tightening credit, falling paper investments and higher unemployment potential. What does it matter if prices fall 20 percent if the maximum mortgage you can secure drops accordingly?
Also, for those wishing to buy if the market drops, it may not be as easy as it seems. Wealth is rather more relative than it is absolute. If you could buy before but strategically chose not to that is one thing, but if you couldn't buy before and are hoping to pounce it is likely that your capacity to buy will sink in parallel on a relative basis. Falling asset prices will be offset by tightening credit, falling paper investments and higher unemployment potential. What does it matter if prices fall 20 percent if the maximum mortgage you can secure drops accordingly?
Mindset
New Member
So the people that have been patiently waiting for prices to drop are now going to change their behaviour and create a buying frenzy. Sure.
More likely scenario will be prices will revert to the mean, and stay there until the majority of speculators have turned their properties over to home owners.
Its all part of the natural cycle, dont fight it, take advantage of it.
lowesthangingfruit
Active Member
What is your definition of "drop significantly" ?? Quite frankly, I wouldn't be surprised if over the next few years a drop of 20-30% occurs. Seems kinda out there but if one compares to previous bear cycles and what has occured in other parts of the world (where some areas are double the losses), 20-30% would seem reasonable and probably healthy.
By the way, these dozens of ppl you know, what employment sectors are they involved in ??
cabbagetowner
Active Member
people can sometimes get carried away with all this bad news in the market. if you've got a job with some security and haven't overleveraged yourself, what's there to worry about. over time fluctuations in the market become noise. buying a house to live in has always been a great foundation for financial independence. in some ways a dip in house prices reflects a healthy market. out of control appreciation is unsustainable and in the end always hurts the economy. i think we're going to see houses become more affordable and cap's increasing. some people in the business of flipping condos might take a haircut. it's not the end of the world. this too will pass and eventually people will forget and the cycle will repeat itself.
lowesthangingfruit
Active Member
Of course, that is why I said it would be healthy to have a correction. Shakes out the marginal buyers/speculators and reflects better true supply/demand fundamentals. If you can afford it and are secure and are gonna hold for multiple cycles regardless of market conditions, then no worries.
What I was referring to were those with suspect job security (but they don't appreciate that it's suspect for whatever reasons) that wants to get prime A real estate downtown and willing to overleverage themselves to get it cuz the model suites or sales agent was so convincing that now is a great time to buy and they will help them find a good variable rate mortgage so they can get in now. That in itself would be worrisome enough and yet I have heard exactly the same story on multiple occassions and even as of a few months ago, some plan to flip when the condo is built. Listen, when ppl that are not in the business of RE are executing these types of strategies, that does make one nervous doesn't it ??
condoboy
Banned
lowesthangingfruit...you should have more faith in these people, the ones that are buying condos. People are much more knowledgeable these days and people know that houses have always been a sound investment....especially with what is happening in the stock markets these days. Have faith, we'll get through this. You're underestimating our young and energetic generation that has learned all about risk management!
lowesthangingfruit
Active Member
You mean the same energetic population that was buying Nortel at $120 and oil at $150 ?? Not saying there is anything wrong with young people (whatever that means,...I guess younger than me ??) and alot are prudent and conservative with their funds, I agree. I am just relating to the media hype surrounding any bubble of any asset class where it tends to attract the "younger" or at least less experienced buyers while the older or more seasoned veterans usually don't follow the trend up all the way to the end.
cdr108
Senior Member
Well with that logic, ppl in TO that are buying for investment purposes are better off to buy in FL.
BTW, historically over the past 100+ years, RE has appreciated no more than 4% compounded annually. The more % it rose greater than average results in a corresponding % back down.
Dichotomy
Banned
We'd all like to think we have job security, but unless you work for the public sector (and have been there for a helluva long time), nobody's job is truly 'safe.'
The company I worked at for 10 years had been in business for 53 years. It shuttered last Fall. The workers where I am now are gloating because this company has been around for 60 years. I am not so confident.
If you've been reading the business pages lately (if you dare, that is), the tone has gone from bemusement a couple months ago, to cautionary and now I'd almost go so far as saying there is reserved fear in the news. Already many editorials are lashing out at corporate greed, government laziness, etc. That's the first sign that the media is getting worried.
The truth is, unless you can put down more than 25% on a home, you're not 'safe.' Since many new buyers put down a lot less than that, there are probably quite a few nervous buyers out there right now.
Urban Shocker
Doyenne
Quite a few of them will be even more nervous sellers, soon.
lowesthangingfruit
Active Member
Ummmm, yeah. Even as far as 2 years back I do know ppl that I thought were not in a financial positions to own the properties they "bought" (or more accurately are renting from the banks) and are just a recipe for disaster if they take a pay cut or lose their jobs. The only reason why they got the mortgage was cuz of some financial slight of hand and in my opinion, banks they were dealing with broke that cardinal rule of "never lend to ppl that need money.".
Shtopor
New Member
Hi fellas I am new to this forum. I am holding my money ( though wife is getting impatient) for like 2 years and have a strong believe that prices will go down.
As far as I understand the strongest argument among non believers is the fact that in USA a lot of mortgages were given with 0% down.
Looks like in Britain situation wasn't as in USA but prices are falling too.
I think many houses that bought here in Toronto with only 5% down are not far better then 0% down. When prices drop 20%, most of these houseowners will
find themselves very tempting to just bring the keys back and rebuy the same kind of house cheaper. I was personally hoping for more like 10-15% drop but with recent development in financial markets something tells me it will be 25-30% drop if not more. Anyone here supports my stand on this ?
Oh, btw, at work I spoke with one gent and he said his friend who lives in Brampton one house over from his was offered by RE agent 349.900 9 months ago and now his house is for sale for 2 months for 299.900 and he didn't get offer yet, just yesterday his RE agent adviced him to drop asking price to 289.900. He said a house which they thought was worth 365.000
was sold for 304.000 at the same street.
Here is anothe one:
My wife at work was told by her employer that his relative bought a house for 899.000 3 months ago ( don't know where exactly though) and now he sells it for 699.000 and didn't get an offer yet. Also he added that RE agent whom he knows works in RE agency and for the past month they sold 2 houses thogh there are 45 RE agents who works there.
So , things have started to move for those who were on sidelines.
I bet RE agents should begin singing a different tune to sellers if they want to make money in this bussiness.
As far as I understand the strongest argument among non believers is the fact that in USA a lot of mortgages were given with 0% down.
Looks like in Britain situation wasn't as in USA but prices are falling too.
I think many houses that bought here in Toronto with only 5% down are not far better then 0% down. When prices drop 20%, most of these houseowners will
find themselves very tempting to just bring the keys back and rebuy the same kind of house cheaper. I was personally hoping for more like 10-15% drop but with recent development in financial markets something tells me it will be 25-30% drop if not more. Anyone here supports my stand on this ?
Oh, btw, at work I spoke with one gent and he said his friend who lives in Brampton one house over from his was offered by RE agent 349.900 9 months ago and now his house is for sale for 2 months for 299.900 and he didn't get offer yet, just yesterday his RE agent adviced him to drop asking price to 289.900. He said a house which they thought was worth 365.000
was sold for 304.000 at the same street.
Here is anothe one:
My wife at work was told by her employer that his relative bought a house for 899.000 3 months ago ( don't know where exactly though) and now he sells it for 699.000 and didn't get an offer yet. Also he added that RE agent whom he knows works in RE agency and for the past month they sold 2 houses thogh there are 45 RE agents who works there.
So , things have started to move for those who were on sidelines.
I bet RE agents should begin singing a different tune to sellers if they want to make money in this bussiness.
admc
New Member
I'm sure there are a few specific examples of how housing prices are plunging, but the real question is whether or not these are reflective of the market at large. Any thoughts?
I just bought a condo a few weeks ago in Liberty Village (not as an investment, but to actually live in), and I'm thinking that maybe I should have waited. Hmmm...