Canada's 'housing bubble' deemed close to bursting

[suburbanite]

Originally Posted by lio45

True. The cutoff birth time for “born early enough to able to amass large quantities of urban Canadian real estate without needing to have been born rich” is somewhere in the mid/late 1980s.

Yep, and now I'm relegated to just doing the work for the people and institutions that have amassed large portfolios of real estate. Although to be fair I, find working on large commercial transactions far more interesting than managing residential properties even though the latter would likely make me wealthier.

[lio45]

Originally Posted by niwell

Even if you were born in the early to mid-80s you would need to have all your 🞵🞵🞵🞵 together and a coherent goal early on in order to do so. Staying in school a bit long and/or doing a Master's for instance makes it a lot more of a stretch. Some people got lucky and ending up buying in the right area at the time time, too.

If we want to talk about hindsight I'd probably be in a much better financial position had I stuck to the summer construction type jobs I did and saved it all to buy real estate. Lots of reasons that wouldn't happen, even if I did have the knowledge at the time.

Originally Posted by someone123

I would argue that it also matters if something was merely possible or was the default path, and how risky it was at the time. Yet this is often left out of the conversation.

With investment you can usually look back with hindsight and identify a high-risk choice that paid off. That doesn't mean there was a big windfall available to everybody or that such an investment represented a sound decision at the time.

The older Baby Boomer aged folks who happened to be living around Vancouver or now Toronto got a real windfall, millions just from living a normal life in the right place at the right time, without any special risk or foresight (no need to live on rice and beans, leverage to the hilt, getting a 0.1% income, learn how to renovate extreme buildings, or whatever). Once you get toward older Millennials it becomes more and more of a stretch. The whiny article guy exemplifies the case where somebody made somewhat bad decisions and got wealthy despite that.

Inflation arguments often have the same feel. People say that we should just shop around better or switch from steak to tofu or whatever. But the point is the environment changed and the behaviours required for success became more specific and demanding, even though it is possible to duplicate the same outcome in some narrow sense.

You guys are right, of course. For people my age, it was doable (as opposed to “pretty much impossible” for young adults today); for older Boomers, it was easy and nearly automatic.

I often meet people my age or younger who’d like to do like me but my recipe can’t be replicated nowadays (not exclusive to real estate at all; someone who bought tons of Tesla stock early, or tons of Bitcoin at a couple hundred bucks each, can’t really give advice on how to follow in his footsteps as of today).

[someone123]

Originally Posted by lio45

I often have people my age or younger who’d like to do like me but my recipe can’t be replicated nowadays (not exclusive to real estate at all; someone who bought tons of Tesla stock early, or tons of Bitcoin at a couple hundred bucks each, can’t really give advice on how to follow in his footsteps as of today).

I often debated what to do with Vancouver real estate. I am in my 30's and not really old enough to have been established with significant cash to buy a property in time. There are condos which are easier to buy here but they haven't actually gone up all that much since 2016 or so. I think my plain old index funds have done better.

In theory I could have borrowed enough to buy a house at some point and maybe would have gotten better returns from that, in part to more favourable tax rules. One thing I notice is for the most part the sub-$1.5M houses in metro Vancouver are not even all that amazing to live in. The "affordable" ~$1.1M ones are often dumps, and the strata townhouses don't appreciate in the same way. They usually have some major flaws (being too far out given generally bad travel options around metro Van being one). So they are pretty much bitcoins are far as my investment decisions go.

(20 years earlier I would have just picked out a house I liked.)

[rofina]

Originally Posted by niwell

Even if you were born in the early to mid-80s you would need to have all your 🞵🞵🞵🞵 together and a coherent goal early on in order to do so. Staying in school a bit long and/or doing a Master's for instance makes it a lot more of a stretch. Some people got lucky and ending up buying in the right area at the time time, too.

If we want to talk about hindsight I'd probably be in a much better financial position had I stuck to the summer construction type jobs I did and saved it all to buy real estate. Lots of reasons that wouldn't happen, even if I did have the knowledge at the time.

I'm an older millennial any my experience in Canada echoes this.

I caught the wave just as it was about to run away on everyone my age, only because instead of listening to my highly educated immigrant parents, I didn't pursue post secondary education right away, instead I started full time work at 17.

By 22 I bought my first condo, which was a stretch, but manageable. It enabled me to buy land 5 years later, and the rest as they say is history. The smart use of equity from that first condo completely changed my future.

[rofina]

Originally Posted by someone123

I would argue that it also matters if something was merely possible or was the default path, and how risky it was at the time. Yet this is often left out of the conversation.

With investment you can usually look back with hindsight and identify a high-risk choice that paid off. That doesn't mean there was a big windfall available to everybody or that such an investment represented a sound decision at the time.

The older Baby Boomer aged folks who happened to be living around Vancouver or now Toronto got a real windfall, millions just from living a normal life in the right place at the right time, without any special risk or foresight (no need to live on rice and beans, leverage to the hilt, getting a 0.1% income, learn how to renovate extreme buildings, or whatever). Once you get toward older Millennials it becomes more and more of a stretch. The whiny article guy exemplifies the case where somebody made somewhat bad decisions and got wealthy despite that.

Inflation arguments often have the same feel. People say that we should just shop around better or switch from steak to tofu or whatever. But the point is the environment changed and the behaviours required for success became more specific and demanding, even though it is possible to duplicate the same outcome in some narrow sense.

This is a most excellent point.

Like I said in my post above - Ill use myself as an example.

Enter the workforce at 17 full time. Bought RE by 22. I worked 2 jobs when possible, 14 hour days for months on end to save the DP.

The thing is - with todays prices, and with that effort I'm not sure the math would add up unless one is in tech and making 6 figures in their early twenties, which is a real circumstance these days.

The "only" financial help from my parents was living rent free in their house - just to be clear that this is not one of those "self made" stories where the parents gave a $300k DP.

[WarrenC12]

Originally Posted by rofina

This is a most excellent point.

Like I said in my post above - Ill use myself as an example.

Enter the workforce at 17 full time. Bought RE by 22. I worked 2 jobs when possible, 14 hour days for months on end to save the DP.

The thing is - with todays prices, and with that effort I'm not sure the math would add up.

I did something similar, bought at 23. But I was still taking my undergrad, which I started at 17, took 6.5 years as I was working at the same time. Up to full time 40 hrs/week at the end. It was a struggle to finish via night classes, but well worth it. Others I know dropped out.

There's a line between those like us who saved hard and sacrificed to get in the market, and what's possible today. Other people who had identical opportunities to me said they have never been able to afford RE. That's only somewhat true as they pissed away their 20s while some of us focused harder.

Today's 20-somethings though, are in a different boat. It's impossible to save that same down payment. But other opportunities to save are there. The same disciplined and undisciplined people are out there, but the possibilities have changed.

[rofina]

Originally Posted by WarrenC12

I did something similar, bought at 23. But I was still taking my undergrad, which I started at 17, took 6.5 years as I was working at the same time. Up to full time 40 hrs/week at the end. It was a struggle to finish via night classes, but well worth it. Others I know dropped out.

There's a line between those like us who saved hard and sacrificed to get in the market, and what's possible today. Other people who had identical opportunities to me said they have never been able to afford RE. That's only somewhat true as they pissed away their 20s while some of us focused harder.

Today's 20-somethings though, are in a different boat. It's impossible to save that same down payment. But other opportunities to save are there. The same disciplined and undisciplined people are out there, but the possibilities have changed.

I completely agree.

Motivation levels vary.

I have friends that had $50-$100k wins on small crypto or weed stock positions, and they squandered it. Could have easily rolled it into RE if they played it more disciplined.

But its also true to say that there are external factors that might prevent me from even wanting to work that hard today.

I feel old talking to todays 20 years old's. Their idea of the future can be very depressing. And the refrain I hear shockingly often is; what's the point?

Many don't want to invest in the future, because in their mind the certainty of a fruitful future is not worth the guaranteed inconvenience today.

I know that's not a novel thing, younger we are the shorter term we tend to think, but the propensity of young educated folks that tend to have this view is concerning especially as it related to existential things like climate change.

Why grind today, for future comfort, when you're not even sure that future will be able to provide comfort?

[ssiguy]

The younger generation are pissed off and in some ways they have the right to be.

They know that they will probably never enjoy the standard of living their grandparents did and their retirement plans rely on their parents kicking the bucket because saving money is a non-option. They know they are going to have to spend 5 years more in post-secondary to enjoy the relative high incomes and job security people had in the 60s.

Now, to make matters even worse they are going to have to endure less government spending and benefits backed by higher taxes in order to support these wealthy Boomers as they enter retirement and all the healthcare costs that go along with it. This is to say nothing of the huge amount of government spending required to green our economy and planet which the Boomers can take responsibility for doing most of the damage in the first place.

This idea that you had to have picked the right parents in order to enjoy a decent standard of living and quality of life is a very new one.

[hipster duck]

Originally Posted by someone123

I often debated what to do with Vancouver real estate. I am in my 30's and not really old enough to have been established with significant cash to buy a property in time. There are condos which are easier to buy here but they haven't actually gone up all that much since 2016 or so. I think my plain old index funds have done better.

In theory I could have borrowed enough to buy a house at some point and maybe would have gotten better returns from that, in part to more favourable tax rules. One thing I notice is for the most part the sub-$1.5M houses in metro Vancouver are not even all that amazing to live in. The "affordable" ~$1.1M ones are often dumps, and the strata townhouses don't appreciate in the same way. They usually have some major flaws (being too far out given generally bad travel options around metro Van being one). So they are pretty much bitcoins are far as my investment decisions go.

(20 years earlier I would have just picked out a house I liked.)

Like a "career ladder" there used to be a traditional "property ladder" or "housing ladder" that one traveled as one got older.


Source

My parents went through these motions roughly from the age of 25 until just before my dad turned 50, when they reached their peak earnings. I remember my early childhood in a 900ft2 1950s bungalow and, by the time I was 17, my parents bought a sprawling ranch house with a 3 car garage and a pool. My parents were boomers and this was in Peterborough ca. 1999, so that cost them $275,000.

If the property ownership ladder for people in upper middle class careers goes:

1. 1 BR condo
2. Strata townhome in a mediocre location
3. Freehold home in a mediocre location and/or condition
4. Freehold home in a good location and/or condition
5. Luxury home

Then most millennials will barely meet #1, which is at least relatively elastic with respect to supply.

The jump from #1 to #2 isn't too hard, but the jump from #2 to #3 is extremely difficult, because #3 is almost perfectly inelastically supplied.

In Vancouver, if you can make the jump from #3 to #4, you probably have the means to make the jump from #3 to #5 and reap all the rewards. At about $3 million, it seems like quality jumps, as if between $2 and $3 million is where all the bidding wars and competition take place.


The missing middle: "Strata townhome in a good location", "3 BR condo", etc. shouldn't be inelastically supplied but is.

[rofina]

Originally Posted by ssiguy

The younger generation are pissed off and in some ways they have the right to be.

They know that they will probably never enjoy the standard of living their grandparents did and their retirement plans rely on their parents kicking the bucket because saving money is a non-option. They know they are going to have to spend 5 years more in post-secondary to enjoy the relative high incomes and job security people had in the 60s.

Now, to make matters even worse they are going to have to endure less government spending and benefits backed by higher taxes in order to support these wealthy Boomers as they enter retirement and all the healthcare costs that go along with it. This is to say nothing of the huge amount of government spending required to green our economy and planet which the Boomers can take responsibility for doing most of the damage in the first place.

This idea that you had to have picked the right parents in order to enjoy a decent standard of living and quality of life is a very new one.

Its actually an idea as old as the human race itself.

What's new is that its being applied now in Western Nations. Nations that provided opportunities for people without generational wealth.

What will become abundantly clear in the coming decades is that the post WW2 world order, with it the growth of the middle class, was an aberration.

A wealthy middle class is the exception, not the rule.

We are now collectively regressing to the mean; ruling class and the serfs.

Davos says as much; you'll own nothing, have nothing, rent everything and be happy.

This isn't even conspiracy, its an actual publicized narrative by the Davos folks.

[Gresto]

Originally Posted by 1overcosc

I know someone who just moved from Kingston to Ompah. Ompah has a population of about 100 people, and has no services other than a fire hall and a church. The nearest place to buy food is in the "neighbouring" village of Plevna, which is 14km away, and that's just a small food mart. The nearest full size grocery store is in Northbrook, 54km away. The nearest community of 1,000 people or more (ie. nearest "population centre"), is Perth, 65km away, which is also the location of the nearest hospital. The nearest actual cities are Kingston and Ottawa, both around 120km away. Ompah is probably the most isolated/rural place you can move to without leaving Southern Ontario.

Ha, hilarious to read about Ompah and Plevna on this forum! I'm intimately familiar with these places because our cottage is north of Plevna in a cluster of lakes. It's a beautiful and quiet place to spend the summer, but I can't imagine living there year-round. Plevna and Ompah are, at best, hamlets, if that. You are correct about their extreme isolation by Southern Ontario standards. Amazingly, there's a pretty good H.H. Building Centre in Plevna. We have spent many thousands there. Both hamlets are about the same size, but Plevna has nominally more services, such as (of course) an LCBO in a shed-sized building and even a small school! Unfortunately, the grocery store is a terribly-stocked, overpriced joke. Too bad. The food store you mentioned in Northbrook is well-stocked but expensive. We prefer to drive to Bancroft for most of our shopping, or Ottawa for a Costco run.

[suburbanite]

Definitely couldn't do something as small and rural as Ompha, but I do love the small Southeastern Ontario towns. I feel like I could spend a month a year in a place like Westport when I'm retired.

Edit: Lol, apparently this goes for $900k in Westport, 45 minutes north of Kingston. Not even on the water.

[lio45]

Originally Posted by rofina

This is a most excellent point.

Like I said in my post above - Ill use myself as an example.

Enter the workforce at 17 full time. Bought RE by 22. I worked 2 jobs when possible, 14 hour days for months on end to save the DP.

The thing is - with todays prices, and with that effort I'm not sure the math would add up unless one is in tech and making 6 figures in their early twenties, which is a real circumstance these days.

The "only" financial help from my parents was living rent free in their house - just to be clear that this is not one of those "self made" stories where the parents gave a $300k DP.

Looks somewhat similar to me. After graduating university I worked for one year, saved $20k after taxes, while living at my parents, and used that as the down payment on a four-story building (3 retail commercial units on the ground floor, 12 small residential units in the other 3 levels) in the downtown of a midsized city (pop. 200k) that brought $40k gross and could easily be optimized. The following year, after cleaning up the building, I refinanced it and used that money to buy another four-story mixed use building downtown, and the wheel was started (“and the rest is history” as you said).

Nowadays you can’t do this anymore, or at the very least, not as quickly.

[kwoldtimer]

Lovely little town, Westport, although I’ve never been there in the winter.

[someone123]

Originally Posted by hipster duck

The missing middle: "Strata townhome in a good location", "3 BR condo", etc. shouldn't be inelastically supplied but is.

And note that this is exactly what Vancouver's zoning cuts down on. People with an upper middle class income can afford the land costs associated with a decent-sized condo in the Commercial Drive area in a 40 storey building but not a 3 storey building.

This is a shortcoming the people who set the rules can live with. They already own the land and to them aspects like preserving the traditional feel and views in these areas is more important than affordability. I suspect we also have a certain amount of "zombie NIMBYism" put in place by people who cashed out of these areas years ago.

[rousseau]

Originally Posted by kwoldtimer

Lovely little town, Westport, although I’ve never been there in the winter.

Never heard of it, so I had to take a look. It does indeed look very charming.

There's a certain population threshold from 100+ years ago determining whether a town in Eastern Ontario has a solid wall of commercial buildings in its core, and you notice this the farther you drive northeast of Toronto. Down here even tiny villages had/have unbroken commercial frontage of varying lengths right in the centre instead of detached shopfronts.

It's thunderingly obvious, but it's still fun to take note of how Eastern Ontario serves as an architecural transition zone between southern Ontario and Quebec.

[someone123]

Originally Posted by hipster duck

The jump from #1 to #2 isn't too hard, but the jump from #2 to #3 is extremely difficult, because #3 is almost perfectly inelastically supplied.

I don't know how common my situation is but my household's a case where a jump would be relatively straightforward/doable but the numbers seem not to be worth it. I don't think it's worth $300,000 to go from a condo to decent townhouse or crappy house, though it's difficult to quantify the value of having your own private outdoor space.

I think it makes more sense to keep a tiny bit of Vancouver real estate and travel elsewhere, maybe buying elsewhere too. This leaves open the option of buying locally if things change but also covers the case where the market gets more and more insane. I'm not sure I'll even have a lot of durable personal connections to this city in the coming years since so many people I know have left.

The consequence of this is this condo I'm in never gets "backfilled" by a younger household.

[rousseau]

All this talk of real estate templates and empires is daunting. Me, I didn't follow the conventional trajectory at all, having been out of the country in the 1990s and never having been a big earner or interested in amassing a "portfolio."

Still, though, my wife and I got 🞵🞵🞵🞵🞵🞵🞵🞵 lucky in the chronological lottery when we bought in the sticks (Stratford) in 2004 after cobbling together the money for a down payment. In hindsight, though, we would have been even luckier had we had the proverbial balls to stretch things to the limit and buy something somewhere in downtown Toronto back in 2000.

We've lamented that. After twenty years we could have sold and become rich, and settled in a charming little place like, uh, Stratford. But that counterfactual would have resulted in a completely different life for us, and we honestly can't complain about the way it's gone for the last couple decades, so...shrug.

Real estate as an investment? It's not for everybody. From what I've been told, you need the stomach for the inevitable bad tenants. It's certainly not for me.

[rofina]

Originally Posted by someone123

I don't know how common my situation is but my household's a case where a jump would be relatively straightforward/doable but the numbers seem not to be worth it. I don't think it's worth $300,000 to go from a condo to decent townhouse or crappy house, though it's difficult to quantify the value of having your own private outdoor space.

I think it makes more sense to keep a tiny bit of Vancouver real estate and travel elsewhere, maybe buying elsewhere too. This leaves open the option of buying locally if things change but also covers the case where the market gets more and more insane. I'm not sure I'll even have a lot of durable personal connections to this city in the coming years since so many people I know have left.

The consequence of this is this condo I'm in never gets "backfilled" by a younger household.

Amen.

Same boat, I think, most Vancouverites are in.

Hard to put down roots with community ties when everyone packs up and leaves, eventually.

[1overcosc]

Originally Posted by Gresto

Ha, hilarious to read about Ompah and Plevna on this forum! I'm intimately familiar with these places because our cottage is north of Plevna in a cluster of lakes. It's a beautiful and quiet place to spend the summer, but I can't imagine living there year-round. Plevna and Ompah are, at best, hamlets, if that. You are correct about their extreme isolation by Southern Ontario standards. Amazingly, there's a pretty good H.H. Building Centre in Plevna. We have spent many thousands there. Both hamlets are about the same size, but Plevna has nominally more services, such as (of course) an LCBO in a shed-sized building and even a small school! Unfortunately, the grocery store is a terribly-stocked, overpriced joke. Too bad. The food store you mentioned in Northbrook is well-stocked but expensive. We prefer to drive to Bancroft for most of our shopping, or Ottawa for a Costco run.

Small world!