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The Unintelligible Investor

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  • Canadian Housing: It Actually Is Different This Time [View article]
    P.S. Many baby boomers will not be extracting equity from their homes to retire. They will simply not retire.
    Nov 9 10:43 AM | Likes Like |Link to Comment
  • Canadian Housing: It Actually Is Different This Time [View article]
    All fair points. Again, I am not arguing that Canadian real estate prices will continue on their current trend. I am arguing that they will not suffer a 35% collapse like that incurred in the US, because of several mitigating factors that I outlined.

    The first few points you make there are all reasons why sales have slowed in the months following the CMHC changes.

    As for Price-to-rent ratios: again, as I outlined, comparing these values across time is not a fair comparison because they do not account for declining interest rates. I bet if you were to look at Price-to-Net Operating income ratios, which incorporate interest payments, you would find that the current average does not deviate from the historical average by such a large degree.
    Nov 9 10:42 AM | Likes Like |Link to Comment
  • Canadian Housing: It Actually Is Different This Time [View article]
    Thanks for the clarification.
    Nov 9 10:37 AM | Likes Like |Link to Comment
  • Canadian Housing: It Actually Is Different This Time [View article]
    To be clear, I'm not recommending anyone load up on Canadian real estate. There are clearly better investments out there, including US real estate. I am arguing that the Canadian real estate market (and by extension the Canadian economy) is unlikely to suffer a titanic collapse a la US real estate in 2007/2008.
    Nov 9 10:35 AM | Likes Like |Link to Comment
  • Canadian Housing: It Actually Is Different This Time [View article]
    True. so if interest rates fall dramatically and incomes are stable to increasing slightly ...... prices can float upwards without defying gravity. Gravity gets a little less powerful.
    Nov 9 10:33 AM | Likes Like |Link to Comment
  • Canadian Housing: It Actually Is Different This Time [View article]
    Great points. The key here is what will cause a string of defaults? The US housing market collapsed under the weight of its own leverage. Unless rates spike higher, thats unlikely to happen in Canada.

    Plus, the spiral in the US was compounded and magnified by the uncertainty over government backing of the banks. The US economy plunged because of fear of what was happening with the banks, not out of fear of what was happening with the housing market.
    Nov 8 09:11 AM | 1 Like Like |Link to Comment
  • Canadian Housing: It Actually Is Different This Time [View article]
    That's great insight and it's pretty much what I expected. As I understand it, the vast majority of purchases by immigrants or other international investors/owners are made with alot of equity into the proptery, so a decline in prices is less likely to precipitate a vicious cycle of foreclosures.

    Granted, there might be a bit of panic selling to protect their equity, but there will also be alot that are comfortable with the shor-term decline.
    Nov 7 01:12 PM | 1 Like Like |Link to Comment
  • Canadian Housing: It Actually Is Different This Time [View article]
    RIght. The US crash made it obvious that the freewheeling policies would lead to disaster and the Canadian governmetn was able to rein in their policies before leverage got out of hand.
    Nov 7 12:49 PM | 1 Like Like |Link to Comment
  • Canadian Housing: It Actually Is Different This Time [View article]
    Great info. Thanks for that. I disagree that the credit crisis 'delayed' the Canadian crash. It was a comparatively strong economy fueled by natural resources that 'delayed' the crash.
    Nov 7 12:47 PM | 1 Like Like |Link to Comment
  • Canadian Housing: It Actually Is Different This Time [View article]
    This is a fair point. I am certainly not suggesting that the Canadian real estate market remains on its current trajectory. Its just not likely there will be a collapse.

    Also, what I am suggesting here is that Canadians are not as over-indebted as we might think. In this low-rate environment, they can fairly comfortably make their payments.
    Nov 6 04:36 PM | 1 Like Like |Link to Comment
  • Canadian Housing: It Actually Is Different This Time [View article]
    Right. The Canadian government may take a hit ... but the question is, how much of a hit? Will it be enough to impact Canadian long-term rates? If the Bank of Canada has to step in and buy up long-term Canadian debt to keep rates down, this will negatively impact the dollar, which will strengthen Canadian exports, which is still Canada's number 1 economic driver. So we have natural support.
    Nov 6 04:24 PM | 1 Like Like |Link to Comment
  • Canadian Housing: It Actually Is Different This Time [View article]
    There is some truth in this. I am not arguing that prices will continue increasing as they have. It is likely that they flatten out, especially in an increasing rat environment.

    The counter to your argument, however, is that, presumably, if we find ourselves in an increasing interest rate environment, it would be because 1) economic growth has reached potential 2) inflation has increased and needs to be contained.

    In this scenario, it is likely that Canadians will have higher incomes, which will help them afford higher rates.
    Nov 6 04:23 PM | 1 Like Like |Link to Comment
  • Canadian Housing: It Actually Is Different This Time [View article]
    Housing prices are not bound by a physical constant like gravity. They are bound by a variable factor (interest rates).
    Nov 6 04:18 PM | Likes Like |Link to Comment
  • Canadian Housing: It Actually Is Different This Time [View article]
    Not true. The argument that was made in the US in 2006 and 2007 was that housing prices will NEVER FALL. Thats what was plugged into all risk models at the rating agencies and investment banks and that's how the lenders justified the massive risks they were making with their subpar borrowers.
    Nov 6 04:17 PM | 1 Like Like |Link to Comment
  • Canadian Housing: It Actually Is Different This Time [View article]
    Yep, great point.
    Nov 6 04:15 PM | 1 Like Like |Link to Comment
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