Sylvanfan, I can't say I disagree with anything in your post. As for the 26-yr-old, he's a friend of the family's and he said to my daughter that, "I think your father disapproves of what I do." Well, yes I do and no I don't. While I disagree with what he's doing, in part, there is lots that he's doing that I agree with. I don't think he should be loading up on real estate, granted, and I disagree with the highly aggressive speculative investments (I struggle with that term because I feel that aggressive speculative ventures are not investments in the traditional sense, and my CFP studies taught me that these things are not investments - the speculative stuff, not the RE). However, you're absolutely correct, and I've told him this, that while I disagree with his choices, he's way smarter than most 26-yr-olds. I'm proud that he's doing this, if not the best thing at least he's not pissing his money away as most people do at his age.
Very good points you make, SF. Cheers....
Quote:
Originally Posted by SeeGeeWhy
As many have pointed out already, those "average home price" figures are dubious at best. The CREB is constantly changing their 'average home' definition, making the usefulness of the data as a short term forecasting tool ineffective.
I thought Oracles were supposed to espouse on the future, and not be concerned with short term trends?
This was an interesting post for sure. My responses are to the parts in bold.
1. I'd say that you should qualify your desire to see a large RE correction by first asking yourself the question "What are the fundamentals of the correction?". If the market drops out because oil goes to $30, or the government puts a big carbon tax on CO2 emissions, or something catastrophic along those lines, your kids and their friends will still not be able to get a house because they will be out of work. As crazy as mortgage practices have seem to have become, I am pretty sure that the bank requires that you are gainfully employed before they write up your loan, especially if it is their practice to sell it to another institution (which it very likely is). I am with Photon in the sense that, while precarious, the economics of real estate in Alberta are still favourable for investors. But I see what you are saying - you want the market to correct to the point that it is also favourable for the average homebuyer to get in. This is also a good thing for the investor because it makes things even more predictable.
2. Of course this is true - rent will always be a reflection of what it costs to purchase in an area. A landlord, unless subsidized to do otherwise, will always put their rent cost in the area of 75 - 90% of the monthly payment required to finance purchasing the property using the lending vehicles that are presently available. Owning property is a business like any other, why would they not charge what they can? Again, your point is reflecting your desire to see your kid out of your door and onto their feet.
3. This is where things get blurry. What stocks are you comparing to what real estate markets? Real estate as a sound investment is much less risky than real estate as speculation. The same is true with stocks - are you buying blue chips like Coca-Cola, or are you acting on a tip that you got from a commerical or a friend of a friend and are now deciding to buy a penny stock or a "5 star" mutual fund. The difference between the two (investment vs speculation) is like comparing buying a government bond to taking your bankroll down to the Casino. The bottom line is that it is much easier for an investor to become well versed in the fundamentals of real estate than it is to know how the market is going to value a publically traded company.
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1. A RE correct can occur that would help out potential buyers without necessarily resulting from a crash in the energy sector.
2. Okay.
3. I don't deal with highly speculative ventures or stocks. I'm taking about mroe conservative equities, blue-chip stuff. I'm not highly aggressive myself and clients who wish to be are discouraged by me and I even refuse to do some stuff that is beyond my comfort zone.
Very interesting thread. I'm surprised at some of the posts in the sense that there are some folks on here who are pretty smart about these things. I came on here expected to see some inaccuracies that needed to be corrected, but really haven't found anything that demanded a correction. Good job.