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      01-14-2011, 10:19 PM   #33
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Drives: 335i
Join Date: Sep 2009
Location: Toronto

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Originally Posted by aspiring335 View Post
I don't think I agree. The relevant stats from NYC are the prices BEFORE real estate crashed not after when no-one wanted to buy. I have no doubt that people buying real estate in NYC post-crash made out like gangbusters. But at the same time, the collapse of real estate wiped out millions of people who had bought near the top of the bubble. The reason there were prices that later turned out to be bargains was because people were afraid of real estate and didn't want to buy.

It's only the persistent availability of cheap credit throughout the 2000s that has really juiced the housing market, despite all the myths about it being a product of wealthy foreign investors, etc. We still have cheap credit, but not for ever, and we've also pulled a huge amount of demand forward from the future in Canada in a pretty desperate effort to stave off more economic hardship.

My concern isn't for the savvy real estate investor, but for the poor sap who buys with 5% down, gets cashback to recoup that 5% and has a 35-year amortization. Despite the myth of Canada's conservatism and restraint, these types of buyers make a very large number of those buying new homes and condos. Prices don't even have to fall to put them underwater -- closing costs if they need to sell will do that.

Our banks are in good shape, yes, but partly because all of the risk in the mortgage market has been offloaded to the taxpayer via CMHC. Think we don't have sub-prime in Canada? Well to me, mortgages that need to be underwritten by a federal agency because the buyer has no actual money sound pretty sub-prime and they're only viable if the value of the asset increases rapidly forever.

Does this mean a housing collapse is likely in Canada? I doubt it, but I would be comfortable predicting at least a 15% decline in prices over the next 18-24 months, then at the very least three years of pretty stagnant prices.

It's not different in Toronto, different in Vancouver, different in Calgary, etc. All these markets are driven by basically the same variables, and generally these variables are international and national, not local. A single family house in Kitsilano or Rosedale will probably fare a lot better than a condo in Brampton or Richmond, but history shows that nowhere is immune to these kinds of cycles.

this guy knows what he's talking about.

buy the place to live, not to invest. if you want to invest, i say wait 3-7 years and watch the prices fall and find some prime locaitons to buy your condo as an investment.