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Always astounds me when people think they are rich based on the perceived "value" of their homes.
Your property is only worth what others are willing to pay for it. If everyone suddenly decided not to buy Vancouver property (natural disaster, economic catastrophe, etc), your wealth will dissipate like smoke. Poof! Don;t think that can happen? It has, time and time again, in many, many cities.
Once expensive homes can crater in value practically overnight. But people are convinced that nothing like that could ever happen to the Canadian housing market. That's what makes bubbles and speculative markets so dangerous; they delude everyone contained within into thinking they are somehow different or special. Like frogs in a boiling pot, the realization that something is wrong only comes when it is too late.
The OP's million dollars does not exist until he either sells the home or borrows against it. Real estate is great as part of a balanced financial portfolio, but it is not wise to have it as the bulk of your nest egg. Liquidity and diversification should be your goal, not a perceived market value that is only a number on a piece of paper or was pulled from some darker nether region.
Always astounds me when people think they are rich based on the perceived "value" of their homes.
Your property is only worth what others are willing to pay for it. If everyone suddenly decided not to buy Vancouver property (natural disaster, economic catastrophe, etc), your wealth will dissipate like smoke. Poof! Don;t think that can happen? It has, time and time again, in many, many cities.
Once expensive homes can crater in value practically overnight. But people are convinced that nothing like that could ever happen to the Canadian housing market. That's what makes bubbles and speculative markets so dangerous; they delude everyone contained within into thinking they are somehow different or special. Like frogs in a boiling pot, the realization that something is wrong only comes when it is too late.
The OP's million dollars does not exist until he either sells the home or borrows against it. Real estate is great as part of a balanced financial portfolio, but it is not wise to have it as the bulk of your nest egg. Liquidity and diversification should be your goal, not a perceived market value that is only a number on a piece of paper or was pulled from some darker nether region.
I think people know this NorthYorkEd and if they accept that than they will be just fine as they are... I know an immigrant family who bought a home back in the late 70's for 30K at the time.. It is now worth around 1.3 million dollars in T.O in the current R.E market - so even if the price of their house lost a large percentage of 'value' in some sort of crash they'd be fine and really they are just using it as a home like they always have, no a get rich out of jail card. Could a crash happen - yes but is it predicted and is the environment the same now as it was decades ago with the Canadian market.. Depends on who you ask...
You give good advice re a balanced portfolio but at the same time noboby has a crystal ball when it comes to the what will happen with the Canadian R.E market....I think if a family can manage their mortgage payments, even if there are interest rate increases, in the long run most will be fine and will see it as a good investment. In the meantime, if people make real money in the form of capital gains from the sale of a home - all the power to em..
Vancouver could certainly fall victim to a super quake - should we be making life decisions based on this? What will happen to Apple in Cupertino when the super pacific rim quake happens....what about the resultant Tsunami so perhaps noboby should buy a house and just fear catastrophies. Silicon Valley, lets move to Wyoming - oh wait Yellowstone is there....
There is no more bubble. Real estate has appreciated so much since then even a claw back of 20% is nothing.
The definition of a real estate bubble is when house prices on average detach from local economy incomes.....Vancouver is a textbook case of that...but a bubble can last for a very long time.
If Vancouver can effectively reach the "Montecarlo scenario" escape reality is still to be seen.
Canadians, on average, have an astounding amount of debt to carry.....
The definition of a real estate bubble is when house prices on average detach from local economy incomes.....Vancouver is a textbook case of that...but a bubble can last for a very long time.
If Vancouver can effectively reach the "Montecarlo scenario" escape reality is still to be seen.
Canadians, on average, have an astounding amount of debt to carry.....
Most debt Canadians have is tied into their homes - so if prices of homes tank than yes, alot of people will be in trouble if they can't sustain the mortgage payments. Speaking of catastrophy, might have to get the in-laws to move into the basement to help out!
Most debt Canadians have is tied into their homes - so if prices of homes tank than yes, alot of people will be in trouble if they can't sustain the mortgage payments. Speaking of catastrophy, might have to get the in-laws to move into the basement to help out!
Well yeah lol... If most people didn't have debt they wouldn't have a house or even a car.... The ultimate question in the long run is will people who invest in R.E be better off or not... Certainly in Canada since the mid nineties the answer is a big fat yes.
Well yeah lol... If most people didn't have debt they wouldn't have a house or even a car.... The ultimate question in the long run is will people who invest in R.E be better off or not... Certainly in Canada since the mid nineties the answer is a big fat yes.
Reasonable amount of debt is necessary and good for productive endeavors, excessive debt for consumption and speculative asset bubbles is bad.
Reasonable amount of debt is necessary and good for productive endeavors, excessive debt for consumption and speculative asset bubbles is bad.
Well we'll see about that won't we... I honestly don't know what is going to happen to the bubble... I'm not sure the experts know either - they've been telling us a long time its going to burst and be a disaster well - something tells me most Canadians aren't losing sleep over it.. At what point do the bubble bursters kind of throw in the towel and say we've lost this debate the bubble ain't bursting - another 5 years, 10, 20, 30 years? I mean obviously if the bubble bursts and a large number of people start losing their homes and the economy tanks than that'll be the point where those saying the bubble will never burst will lose - the proof is in the pudding at that point, but yeah just wondering on the other side who just seem to be voices in the distant.. I honestly don't know if it will or it won't and what the impact is going to be one way or the other.
I'm not sure the experts know either - they've been telling us a long time its going to burst and be a disaster well - something tells me most Canadians aren't losing sleep over it.. At what point do the bubble bursters kind of throw in the towel and say we've lost this debate the bubble ain't bursting - another 5 years, 10, 20, 30 years?
These 'experts' have been predicting probably back in 2000. 15 years later and still nothing. Even if it does happen it's not going to be the disaster like they make it out to be. Also they should shut up about it since every year they've been going on ad nauseam without any consequence. It's like me going to an old person and saying every year 'You're going to die this year'. Eventually I'm going to be right by . It does not make me look like I can predict the future.
I know an immigrant family who bought a home back in the late 70's for 30K at the time.. It is now worth around 1.3 million dollars in T.O in the current R.E market - so even if the price of their house lost a large percentage of 'value' in some sort of crash they'd be fine and really they are just using it as a home like they always have, no a get rich out of jail card. Could a crash happen - yes but is it predicted and is the environment the same now as it was decades ago with the Canadian market.
Yes, I agree that over the long-term, it has historically been wise to invest in owning property. However, I am more concerned with the rampant and often unchecked speculation and greed that have been hallmarks of the market for the past 10-15 years.
This rapid growth of market value is unprecedented and has outpaced all other economic indicators. Never before in history have we seen such rapid rises in home market values while incomes remained stagnant and Canadian debt loads have been breaking all records. It is not crazy or doomer talk to say that this is unsustainable. Something has to correct at some point. The exact when, how, and to what degree are all open to speculation.
If people were still buying homes to live in and grow their wealth over the natural course of time, prices would not have risen to these levels. It has been the gold-rush mentality that has led to prison-cell-sized condos selling for ridiculous prices, and couples crawling over each other to overbid on piles of rotten wood, crumbling concrete, and bug-infested basements. It's a mania. And they always end at some point.
I also think lifestyles are changing. No longer does someone buy a house and work the same job for 20 years, raising their family and growing deep community roots. Jobs and careers are much more transient, marriages and relationships are much more unstable, and people have to constantly shift locales and jobs to keep moving forward and stay competitive. Home ownership does not lend itself well to this modern model.
The fact is, many Canadians are cash-strapped and completely enslaved by the costs of "owning" their home. They are hanging on by the skins of low interest rates, going full-steam on dual incomes, and what if someone gets sick, loses their job, or interest rates surge? Affordability has been chucked out the window in favour of maximizing "house"; I do think there is substantial pain ahead for those who have not planned or prepared themselves properly.
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