It absolutely blows me away how when it comes to real estate, almost everyone who owns a home believes that their local market is somehow immune to a significant drop.
I'm a Canadian and know a lot of great people up in Canada. Lately, I've been trying to talk some sense into my friends, suggesting they sell their home or at least the second or third "investment" properties they own.
Even in overheated markets like Toronto, Vancouver and Winnipeg, Canadians seem to believe what Americans did just eight years ago, that real estate prices only go up. We all know how that worked out.
I think it's important to learn about money and entrepreneurship. I have two sons who are twelve and nine years old. I've been playing a great game with them lately that teaches the concepts of money and investing. It's called "CashFlow." We own the board game, but there is also a free online version that's great. I highly recommend playing it, regardless of your age. It's fun and teaches some important concepts.
In Cashflow, players are presented with opportunities to buy and sell assets. Just like in real life, the winning strategy is to buy low and sell high, and collect as much income from your investments as possible. My sons understand that it's smart to sell real estate near all-time highs and I think most of my friends up in Canada would too--when playing the board game. However, when it comes to real life, their decisions are influenced more by emotions than by logic.
I explained to my sons how in real life, most people prefer to buy investments near important highs and are afraid to buy them near significant lows. They thought I was kidding.
To give you an idea just how ridiculously overvalued real estate has become in Canada and how irrational "investors" have become, read this recent blog post, "In Extremis."
Here's just one excerpt from this article, "The average condo in the GTA costs $386,800 to buy and $2,465 a month to carry after putting $20,000 down and accepting a $380,000 CMHC mortgage. You can rent the same place for $1,600. No debt."
Hello!!! Anybody home? Stop drinking the Kool-Aid your local real estate marketing board is serving. They always want people to buy and people only buy when they think prices will continue rising.
Even in the US, we are near a multi-year high in the real estate market and prices can be expected to drop over the next couple of years--sharply in many markets. Read this article, "Housing - Looking Over the Edge of a Cliff" for more details.
I hope you got something from this article and share it with your friends. If you'd like to learn of some rational investments to consider, get a FREE copy of my special report, "How to Protect and Grow Your Money in 2014."
And if you'd like an unbiased and rational second opinion about your current investment portfolio, I'd be happy to assist you with that. Contact me today to discuss.
Flourish and prosper,
Craig Brockie - Registered Investment Advisor
Contrarian Advisors - Rational Wealth Management
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