And this ain't prediction, because prediction is a crap business and BTW I am not suggesting a crash or the bursting of a bubble, I am saying when do these batshit crazy prices increases end?
Because the wild increases will end
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And that's analysis not prediction
Either the government stops it with mortgage rule changes, or inflation pushes bond yields and in turn fixed rates to a point consumers step back or the market burns out on its own accord, enough people just quit looking
Do I know when?
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No I don't, maybe some time this year
Will prices reverse? Maybe, I simply know the ridiculous appreciation will stop
So what does that mean? Well what it historically means is some sort of price dip occurs even if only because people who bought have to sell
(Hello 2017)
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And based on the 2017 experience the need to complete transaction brings about a dip not a crash
And that brings us to one of the things I hate about this wild year of RE value increases, ordinary people will be caught in squeezes, either a "Must Sell to Complete Purchase"
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Or appraisal failures which DO happen when appreciation suddenly halts
And I feel sorry because unlike this gang on Fintwit these people really DID think prices only go up
Their family and friends assured them it was true
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Canadian Real Estate Prices Leading Some to Craziness
I posted the other day about Buyer exhaustion at the stressful RE bidding wars that caused some folks to quit looking which conceptually could level off RE price trends
Many interesting responses but a few were wild
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Some thought house prices could go much higher
And a couple thought Toronto house prices were LOW and needed to catch up with Vancouver house prices
People are entitled to think whatever they want, that's the beauty of Canada
Here's a thought though:
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There is a fault line in RE in many regions
When you want to get into the market you hate the high prices
The day your offer is accepted you pray the prices keep running up
And it not like Equities, RE is an illiquid product, unlike stocks your kids sleep in the RE
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The massive downturn in the Toronto condo market is documented everyday
The facts are just easy, Airbnb collapse, foreign University student collapse, downtown restaurant and hospitality worker renter exodus, flight from small living spaces
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It's a long list that radically reduces the number of renters and drives condo owners to seek freehold housing
Heck, we even have relentless addition of new condos from completing construction projects
The simple supply / demand math destroys value with no end in sight
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Well maybe a 2022 end in sight but 12 - 18 months of mayhem
Likely 25% - 35% down from peak condo pricing VERY dependent on product with the sub 500 sq ft product in real trouble
But will the contagion spread to Freehold: Towns, Semis and Detached?
Hey, I am not in the prediction business but I am in the observation business
Simple facts: downtown Toronto rents are falling steadily and if they continue to fall prices will errode
That's facts and math not prediction
And rents will fall
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This is simple stuff all Covid related
1) No foreign students, turns out this was big, rarely talked about and looks like they're gone till Fall 2021 2) No Airbnb, not just no tourists, no sporting events, weddings, proms huge list, Fall 2021 for return but slow even then
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3) Too many renters in Hospitality lost their jobs and moved back with parents or doubled with friends: Fall 2021 or never 4) For people with ongoing jobs, downtown offices empty, WFH but HATED cooped up experience, bought Towns or Detached likely NEVER back
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