Quote:
Originally Posted by SpongeG
i can't borrow money from my parents so i'm left out
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Yea, even though I'm not as certain. I've found there are a lot more deeper questions that people forgo when they do "analysis" on Real Estate.
First off, Foreclosure rate is a lagging indicator. As prices fall before they get foreclosed on, heck if you can't afford the payments, you'd just sell it if you're still in positive equity.
Interest rates, what's more dangerous? Higher interest rates that trends downwards, which usually means lower starting RE prices in general or Lower rates that have very little room to go down with a higher rate. What puts more pressure in the future to RE prices?
Demographics, what is the age composition of the current population? Spending as well as housing patterns of the population changes with age. What happens when boomers draw their equity, by downsizing?
Wage growth, how long can RE prices outpace wage growth in Greater Vancouver? The wage multiple can only go so far.
Credit Expansion, how much more credit can one afford? It's no secret since the 50s that people gained more and more credit, either in the form of lower downpayments to revolving credit.
Not a entirely tangible variable is psychology, probably the weakest of my arguments. Consumer attitudes matter a lot in Real Estate Cycles.
A crash is definitely much harder here as walking away isn't as easy, but in my view there's a lot more pressure in RE or risk than it's worth.
FYI quite a few friends and family are heavily in RE and they've been downsizing their investments. I'm obviously a bear who believes anything from a 10% - 30% or even just stagnant prices can occur. It takes a multitude of storms to cause a crash - High unemployment, credit stress, interest rates. Which makes a stagnant or a grind downwards a more likely scenario.
I have yet to read anything that makes sense to me to give RE a decent return compared to a lot of other opportunities out there.
I'm strictly speaking from a investment point of view, buying to live changes the circumstances somewhat but in my opinion it still makes more sense to rent.
Demographia made a study that typically land constrained cities usually have higher "bubble potential" attributed mostly to the psychological factor.