5833 replies to this topic

[VicHockeyFan]

Speaking with my 18 year old daughter this weekend and she is all about buying a condo next year in cowtown where she is at Uni, when I explained to her that it requires careful planning and due diligence to investigate if she would at least break even in 4 years time it tended to sober her up a little.

Well, full marks to an 18-y.o. for talking about it now, smart girl.

[gumgum]

If my kid was old enough and thinking about buying right now I would say go for it. The younger you get into the market the better. Regardless of what property you buy, once you're in, you're in. Fluctuations be damned.

There's going to be good property investments no matter the market.

[true blue oak]

If my kid was old enough and thinking about buying right now I would say go for it. The younger you get into the market the better. Regardless of what property you buy, once you're in, you're in. Fluctuations be damned.

There's going to be good property investments no matter the market.

Good thing he/she is not old enough! Hopefully in a few years when they are the market will be 20-30% more affordable and they won't have to become a slave to debt at the start of their life. yes, if they hold long enough, they will likely not lose a cent, but the loss in their quality of life during that time may be substantial.

[dasmo]

I don't know, a micro loft downtown in the Janion for 100k isn't too big a mountain. Now buying a house in Fairfield for $850k would be a bad idea....

[pherthyl]

Good thing he/she is not old enough! Hopefully in a few years when they are the market will be 20-30% more affordable and they won't have to become a slave to debt at the start of their life. yes, if they hold long enough, they will likely not lose a cent, but the loss in their quality of life during that time may be substantial.

Nevermind the idea that someone is going to hold their entry level condo for 15 years is not reflective of reality. Most young people have no desire to own their condo for that long. They get in the market, and then in 3-5 years they want to upgrade to a townhouse or house or a nicer bigger condo. It's quite likely that getting into the market at these prices on that short timeframe is a bad idea, and they would be much further ahead by just renting the place for that time and then making their first place bigger.

[dasmo]

I personally would not recommend anyone under the age of 25 buying their home. Life needs to be ultimately flexible when you are young...

[Szeven]

Seems to me all Garth suggests is to own the banks instead of depositing in them. ie; a basket of preferred shares paying out between 4-6% where the dividend tax is way less than the tax payable on the 1% the banks pays in a savings account as that interest is taxed as income as opposed to dividend income.

I own my house free and clear. If it is worth $750k and may depreciate 10-20% over the next couple of years then thats a negative return. But I dont care as I am in this for the long haul and have no need to access that money. However if you are a young couple and have need to upsize in a few years or face the possibility of relocating in the same period then now is not the time to tie up $'s in a property as there is a high risk of depreciation which means you could be underwater.

Speaking with my 18 year old daughter this weekend and she is all about buying a condo next year in cowtown where she is at Uni, when I explained to her that it requires careful planning and due diligence to investigate if she would at least break even in 4 years time it tended to sober her up a little.

Thats exactly what im saying. Take a look at bank preferred stocks in 2008. Lots of them lost 50% of their value. That is a lot of risk to tolerate when you get that statement in the mail. Sure if you didnt sell you did alright, but talk about stress! So if home prices fall 40% arent banks going to be in trouble and fall again?

BNS NON-CUM PRF SHRS, SER 14: TSE:BNS-L quotes & news - Google Finance

Not to mention the myth of '4-6% in preferred stocks'. The banks have gotten smart in this falling rate environment. They might coupon them at 5%, or some variable rate you think is good, but they rate reset every 5 years or get called at par. They choose whatever is better ie. keep paying you 5% if rates rise (in which case you get smashed on the value of the preferred), or call them at part and smash you with a loss if rates stay the same. So you buy one yielding 5% at 27 bucks, and get called out at 25 bucks in 2 years. Or rates rise and your pref you own now yields 6-6.5% to keep with mkt forces, and its down to 23 bucks a share to compensate. Things are SOO tight on income stuff right now because everyone is looking for it.

I'll stop derailing the housing thread, but my point is that its not like there are a lot of other attractive avenues to invest. IF housing falls 40%, a lot of other things are going to be hurting as much or more.

[VicHockeyFan]

I personally would not recommend anyone under the age of 25 buying their home. Life needs to be ultimately flexible when you are young...

You can always move, it's not an anchor, you rent it out, and hire a manager if need be, like if you are not in same town. Even lose a little cash-flow each month, you are still building equity.

[gumgum]

^Exactly. If you're young and own you have a hell of a lot more options than someone that rents.

Peter is 20 and buys a condo for $200k in 2012.
Lisa is 20 as well but decides to time the market and buys in 2022, and also pays $200K (+ inflation).

30 years later, who's in a better position?
I'd say Peter by a long shot.

[rjag]

Nevermind the idea that someone is going to hold their entry level condo for 15 years is not reflective of reality. Most young people have no desire to own their condo for that long. They get in the market, and then in 3-5 years they want to upgrade to a townhouse or house or a nicer bigger condo. It's quite likely that getting into the market at these prices on that short timeframe is a bad idea, and they would be much further ahead by just renting the place for that time and then making their first place bigger.

Bingo! my thoughts exactly...also add the fact that while she may go to Uni in Calgary there is a high likelihood she will relocate afterwards

[gumgum]

^Well she could sell and buy somewhere else. Or sell and rent.

[rjag]

^Exactly. If you're young and own you have a hell of a lot more options than someone that rents.

Peter is 20 and buys a condo for $200k in 2012.
Lisa is 20 as well but decides to time the market and buys in 2022, and also pays $200K (+ inflation).

30 years later, who's in a better position?
I'd say Peter by a long shot.

Depends on what Lisa did with her money for those 10 years doesnt it? and do you honestly think Peter will stay in a 200k condo for 30 years? no plans on getting married, having kids etc?

[gumgum]

^But he's in the market, riding the wave up or down. He can sell his condo whenever and upgrade.

I'm sure Lisa put a lot of money into her rent.

[true blue oak]

^Well she could sell and buy somewhere else. Or sell and rent.

Sell after the drop and have to produce the difference between the sale price and the larger mortgage?

Sounds like a bad idea.

[gumgum]

^All one has to do is look at a 30 year trend to know that it will go up in value no matter what - regardless of fluctuations.

Say Peter loses 5% of his value 5 years later but wants to buy somewhere else. Guess what, all properties have lost 5%. Seems a lot less risky to buy sooner rather than trying to time it.

[dasmo]

mmmm it's a bit of an anchor. Especially a house.
If you are 18, I say rent and be free. Don't get me wrong, I'm all for owning, I own. I just see the benefits of renting.
A young person going to Uni? Live in a rented house with three or four friends, have fun, focus on your study and don't worry about it. I rented in shared accommodation until I was 30, saved my money, started a business, and had a down payment when the time was right. Just the psychology of being heavily in debt might have swayed my decisions in different ways.

Now, if mom and dad want to buy you a condo, say yes immediately!

[gumgum]

^I agree owning can be a burden, but not every young person would see it this way.

[Dimitrios]

My question is how can people bet their families real estate lives on a 40% price drop when I think the math makes a lot of sense to buy at 20% drop.

Same reason people didn't all buy in March 2009, and those who bought on Oct. 2, 2008 wished they hadn't. (I'm talking stocks, not real estate, but the message is the same.) The bottom is only apparent after the fact. As has been discussed many times, it's almost impossible to time the market with individual real estate decisions, because it takes most people months to buy a property.

[Redd42]

The younger you get into the market the better. Regardless of what property you buy, once you're in, you're in. Fluctuations be damned.

Have to completely disagree with this one. When I bought my first condo, in 2000, I paid $20,000 less than the woman who owned before me paid. She had paid $103,000 5 years before - I bought it for $83,000. She lost her down payment and any equity she had. The market then was like now - I had lots of time to look and the agent for this unit kept calling me to see if I was still interested. And why was she selling? Because she got married and wanted to have a baby. It is that kind of change in life circumstances in your younger years that makes buying real estate a big risk. And sure she was staying in the market - they were planning on buying a house - but she was starting over again from zero or less than zero.

[pherthyl]

^Exactly. If you're young and own you have a hell of a lot more options than someone that rents.

Peter is 20 and buys a condo for $200k in 2012.
Lisa is 20 as well but decides to time the market and buys in 2022, and also pays $200K (+ inflation).

30 years later, who's in a better position?
I'd say Peter by a long shot.

What's the point of this hypothetical? How about Peter is 20 and buys a condo for $200k in 2012. He gets an awesome job opportunity two years later in San Francisco but prices have declined by 15% and he doesn't have the cash to sell the place and can't move.

Lisa rents for two years, travels the world, and buys a place at a discount when she's more ready to settle down. Who's in a better position now?

The point is the scenario is not to rent forever, the scenario is to rent when it makes sense to rent (when you're young and need to be mobile) and buy when it makes sense to buy (either financially or if you can be quite sure that you are happy and able to wait out a multiyear dip)