Real estate decline 2020

EndlessGravity

Kingfisher
I was aware that the big five banks had stopped doing HELOCS. However, since we're in the process of selling and then buying, I called my bank to talk to them about their lending standards. This was just to make sure we weren't blindsided by anything.

So, our bank is not a big five but it is one of the largest in the country. They have suspended ALL new mortgage loans at least into 2021. They didn't care that we have pristine credit scores and are selling for far beyond what we originally paid.

This gave me pause for how many banks are privately doing this and how it may be affecting price discovery in the market.
 

kel

Pelican
I'll be building a house in the country in the next couple of years, ironically with my 800 sq foot condo money I could build a pretty big pad with all the bells and whistles. Or I could get in on some land. It's a big move.
Am I misremembering from the other thread, or are you in the plains provinces now? Planning on staying there, or open to other places for what you're going to build? Canada is included in my search for farmstead land, I have a lot of friends from Quebec who have expressed interest in the project, so eastern Ontario and east of there are all on the table for me, as well as upstate NY, NH, etc. (and further afield if things all fall into place, but moving dozens of people to Argentina is unlikely to be as easy as just finding a place near where we already are).
 

TheFinalEpic

Pelican
Gold Member
The problem is that real estate prices are very very sticky. For whatever reason people have this ridiculous belief that RE only goes up, so that why when after owning for a while and trying to sell with the appreciation they feel they've "earned", they wait it out, convinced that if there's no bites then it's the market that's wrong, not their price. After a few months when they see their neighbour down the road list a similar house for a bit cheaper to try and undercut them, that's when reality starts to set in and they realize that they too must lower their price. This process iterates a couple dozen times, until prices get too low to ignore based purely off cashflow. This process is very slow, since you're generally (unlike financial markets) dealing with non numbers/financial people, dripping with self-interested, non-quantifiable biases about how much nicer their house is then average, and how markets (particularly the housing one) should work.

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This is Toronto, but is applicable in general I feel. Of the 3 big crashes they had, it was about 5-10 years peak to trough, which retractions of 25-35% or so. You can see what happened (or didn't happen) in 2008, thanks to the super easy money policies that rewarded the majority of homeowners, and screwed responsible savers like myself (Not that I'm bitter). In hindsight I guess it's not a surprise that the gov't is equally reckless with it's money as the public is with theirs, and pandering to the 70% who own homes is probably good politics. I have great fun on other Canada based forums highlighting how screwed people are there I think. Even before the virus, pretty much every applicable metric like Price/rent, price/income, Debt/income was in excess of what the US was when it fell off a cliff, and now rents are going down, incomes going down, debt going up, and taxes will no doubt too. Yet many people are still permanently bullish, convinced that TO is another London, and because Real Estate.

My hypothesis on Toronto and Vancouver (which is Canada as a whole, these two markets have been propping things up for a while now) is that because that little road bump you saw in 2008 did nearly nothing to quell the inflation of prices, we're going to be in for a hurt - Van did see some deflation last year and this year, but not enough for the average home buyer.

By allowing foreign money to influence our RE market, this is what happens. Foreign buyer taxes don't do much to stifle the influx from places like China - People will happily pay a 20% premium to get their money out of the country and into a more stable and liberal economy. They're already laundering it in many cases, what's an additional 20%?

Canadian RE is the third most over priced in the world behind that of Aus and NZ. Those countries aren't doing too hot with their markets last I checked either.

People are bullish right up to the point that the cliff is neigh.

This is coming from a Real estate professional - I am not bullish on Canadian RE - but; there are always deals to be had, and that's what I'm working to find for my clients.
 

Australia Sucks

Kingfisher
Actually many people (especially foreigners) have this perception that real estate in Australia is very expensive and is overvalued. The reality is that Sydney and Melbourne (our two largest cities) are very overvalued.

Almost every other city in Australia (with a few exceptions of niche places like Byron Bay) has a plentiful supply of affordable houses. The equivalent of $500,000 U.S. dollars will buy you a modest home in within 10km of the CBD (central business district) of virtually any city in Australia aside from Sydney and Melbourne. And $1,000,000 U.S. dollars will buy you a modest home in any of those cities in a prestigious beach side suburb that is less than 10 km from the CBD (or alternatively a modest house in an inner city area). And if you are on a budget $300,000 U.S. dollars will buy you a modest family home in a more affordable first home buyer type suburb 30km from the CBD in pretty much any city other than Sydney and Melbourne.
 
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NoMoreTO

Ostrich
My hypothesis on Toronto and Vancouver (which is Canada as a whole, these two markets have been propping things up for a while now) is that because that little road bump you saw in 2008 did nearly nothing to quell the inflation of prices, we're going to be in for a hurt - Van did see some deflation last year and this year, but not enough for the average home buyer.

You might be right that the total value of Canada can be pretty reliant on these markets.

But just as these 2 markets separated themselves for massive gains over the last 20 years, could they not do the same as part of their fall?

You've established yourself that they are buoyed by foreign money and over exuberance. If you're saying the crash would hit hardest in Toronto and Vancouver, I'd likely agree with you. But houses in 2nd tier cities and other areas are mostly tied to the local job market and likely won't crash as much. There will also be alot of work from home types downsizing into cheaper, more liveable communities as the benefits (social, work, internationalism) of the city life decline.
 

EndlessGravity

Kingfisher
If you have cash in hand now, would you buy? Or wait for the crash?

I tell people don't try to time the market. Lots of people in history have been bankrupted or nearly so waiting for "a crash." The government's current desire to engage in shenanigans is blatant and extreme. Who knows what effect that will have?

However, for regular people such as ourselves, we believe cash-in-hand is the most important thing you can have for now.
 

Deepdiver

Crow
Gold Member
Key is to surf mega trends especially in Real Estate which is great in good times and illiquid as hell in bad times. A friend inherited a house in Keene NH. A nice college town in low tax live free or die NH. A 2 family where the 2nd floor tenant has not paid rent since JAN 20 And with the federal eviction moratorium the Sheriff not sure if they can enforce a notice to quit without being Anttifa- BLMed...

Could you carry a 2 family rental with no rent for 7 months especially if you have a mortgage?

Now multiply this by more than 55 Million unemployed. Point is traditional great places to own residential and commercial real estate being cities and college towns are now AOC Bernie bros/hoes and gimmegrints Marxist looting, arson and crime hot spots. Real Estate prices in these areas will continue to crash.

New Mega Trends:

Mass gimmegration will escalate. As AOC Millennials gain power... They gravitate to cities and are immersed in Marxist BLM Anttifa- AOC Bernie thinking and Marxist revolts action. Think confiscatory socialist taxes and rent controls.

There will be no consequence free vaccinations ... Think HIV, SARS, Triple E, West Nile, the dozen new Deer Tick bacterial infections... Covid a diabolical CCP bioweapon subject to multiple RNA mutations if there is an effective Covid RNA vaccine will it be effective before Covid20-21-22 etc mutations AND what will be the multigenerational mental IQ and physical genetic impacts be? So CCP-CovidBLM-Antifa-AOC- Bernie marxists have turned cities and College towns into unsafe biohazard/Crime no go zones.

China in a STEM world is an unstoppable juggernaut ... China annually graduates more ultra high IQ stem and engineering grads than all the STEM and engineering workers in the US and EU combined. They systematically undermine the West and bolster their own innovation centers by using our own legal system against us... Their subsidiaries in the US and EU apply for thousands of patents while Shenzhen has No patent law restrictions on innovation... Western inventors and makers now go to Shenzhen CCP to make their fortunes with no Texas patent law mills suing them into bankruptcy.

Tort law will continue to strangle the US economy... What will the Trillions $$$ in Covid lawsuits do to US healthcare costs... All nursing homes and most hospitals along with MDs and respiratory clinicians will all be sued into bankruptcy. Most local lawyers make their fortunes from large personal injury settlements. Every Covid death equals a $Million lawsuit.

Police who have a militarized mindset will be defunded... Property Fire and Casualty insurance rates will skyrocket with no insurance available in AOC Bernie BLM
Antifa- Marxist no go zones... Good luck getting a mortgage without insurance.

So how to profit from real estate in the age of CCP Biowar and economic competition?

Focus on safer suburbs, exurbs and Rural with great schools, strong 1A and 2A support, Police and fire that take care of those in their communities.

Think out of the box... Buy a SHTF farm with OPM Other People's Money by setting up an LLP that holds 55 year leases to Ecotourism RV sites on your farm... Can charge a quarter million for each 50 year LLP leasehold (20 RV slips equals $5 Million plenty to buy and improve a rural Community Supported Agriculture Eco Tourism farm as real SHTF insurrection insurance with farm artisian well water, local hunting and fishing, off grid wind and solar and large septic biodigesters that protect groundwater. Of course a working community access farm with fields, orchards, berries, greenhouse produce and wild honey that the SHTF volunteers help work and manage. A truck 4WD maintenance building and shooting range will prove invaluable as a source of serious hard capital in the form of heavy duty trucks and SUVs even hybrid/hydrogen EVs that can be recharged on the Eco Tourism solar/wind grid.

You hold the property titles in a South Dakota Trust which is better than Switzerland and you are able to pass on your Ecofarm to your heirs in perpetuity with the SHTF RV sites renewed every 50 years with monthly maintenance fees to cover costs and labor allowing for an upscale farm experience with all the luxuries of farm to table lifestyle. Irony is HK and Mainland Chinese along with EU expats will be drawn to this type of Eco-Farm paradise

Think out of the box and surf the reality of these harsh megatrends with not so obvious profit opportunities.

 
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Dr. Howard

Peacock
Gold Member
I was aware that the big five banks had stopped doing HELOCS. However, since we're in the process of selling and then buying, I called my bank to talk to them about their lending standards. This was just to make sure we weren't blindsided by anything.

So, our bank is not a big five but it is one of the largest in the country. They have suspended ALL new mortgage loans at least into 2021. They didn't care that we have pristine credit scores and are selling for far beyond what we originally paid.

This gave me pause for how many banks are privately doing this and how it may be affecting price discovery in the market.

Wow, what state is that happening in? Here in Wisconsin the banks can't keep up with new mortgages, the small bank I use is at double their normal mortgages issued and doesn't have any new lending restrictions.
 

EndlessGravity

Kingfisher
Wow, what state is that happening in? Here in Wisconsin the banks can't keep up with new mortgages, the small bank I use is at double their normal mortgages issued and doesn't have any new lending restrictions.

They won't do any anywhere in the US. My guess is that smaller banks don't get what's going on and/or have to give out loans to stay viable. Wouldn't surprise me if the Big Five or so are happily waiting to see all the smaller banks get wiped out by the coming defaults.
 

Caractacus Potts

Woodpecker
Gold Member
If you have cash in hand now, would you buy? Or wait for the crash?
I would hold onto cash at least until the election is over. I bought a condo from an estate sale in my blue city in a fantastic location in January 2019. I did some minor renovations and then gutted it in February of this year. The plan was to rent out my current place and move into the new place after the renovations were done.

I was waiting on the contractor to finish another job and then the Kung-flu hit. Then the lockdowns. Then the riots and supply chain issues,etc. I have the money to do the renovations but I don't want to use up all of my liquid cash while things are so uncertain.

The one thing I will probably do is refinance into a 15 year mortgage. I have been contacted twice by the lender to see if I am interested in switching. I will probably do it because I can afford the monthly increase. Aside from that all money is being spent on food and ammo (when I can find it).
 

Pavel

Newbie
I would hold onto cash at least until the election is over. I bought a condo from an estate sale in my blue city in a fantastic location in January 2019. I did some minor renovations and then gutted it in February of this year. The plan was to rent out my current place and move into the new place after the renovations were done.

I was waiting on the contractor to finish another job and then the Kung-flu hit. Then the lockdowns. Then the riots and supply chain issues,etc. I have the money to do the renovations but I don't want to use up all of my liquid cash while things are so uncertain.

The one thing I will probably do is refinance into a 15 year mortgage. I have been contacted twice by the lender to see if I am interested in switching. I will probably do it because I can afford the monthly increase. Aside from that all money is being spent on food and ammo (when I can find it).
Thank you for your reply. I guess your experience is in the US context. I live in England and think the game should be different at least there's no election here.
 

NoMoreTO

Ostrich
The one thing I will probably do is refinance into a 15 year mortgage. I have been contacted twice by the lender to see if I am interested in switching. I will probably do it because I can afford the monthly increase. Aside from that all money is being spent on food and ammo (when I can find it).

I'm not sure about this. There could be alot of uncertainty in years coming with respect to employment, if you have a higher payment, you are more likely to fall behind and have your place seized. Sounds extreme but hard to know how the coming years will go.
 

TheFinalEpic

Pelican
Gold Member
For my take on the "buy or wait" conversation -

You need to be buying with the intention of cashflow right off the bat. If a property doesn't cashflow in good times, it sure as hell won't cashflow in bad times. You need to be looking at cap rate and buying based on deals. I hate to see people paying far too much for a property because they think it will 'appreciate'.

Another strategy is to buy based on the potential for value add. If you can add value to a property, you are in a good spot.

Appreciation is speculation. Pure and simple. You should not expect a property to do much more than be a store of value as historically it keeps pace with inflation.

Treat real estate like a bond, not a stock.
 
I wouldn't buy in any jurisdiction that is in a blue city/county/state unless if/when there is a revolution that clears out the cancer. Very solid red county in a purple state (like Florida) is a gray area and case by case. I would stick to red counties in solid red states for the most part.

The blue team is overtly saying/allowing/demanding the following already:

1. They want to zone single family home areas for low income apartments; i..e. bring the urban ghetto to the nice suburbs.

2. Schools in nicer zones need more poor kids bus in due to racism.

3. Reparations paid for by whites.

4. Defund the police.

5. Allowing violent left-wing mobs to run amok.

6. Want to raise taxes in the middle of a major economic shock.

7. Mandatory lease renewals.

8. Pushing more tenant friendly laws that make acting as landlord/neighbor more costly/difficult when confronted with a problem.

NONE of the aforementioned are good for improving property values, general property rights, or attracting quality tenants.
 

NoMoreTO

Ostrich
^^ Some good points above. Think about where you would want to live in 5 years if things go bad. Myself, I'd be a little less concerned about getting a price bump and more concerned about getting a place to live that is "livable".
 
^^ Some good points above. Think about where you would want to live in 5 years if things go bad. Myself, I'd be a little less concerned about getting a price bump and more concerned about getting a place to live that is "livable".

Exactly how I'm thinking.

I'm really more concern with being in a safe jurisdiction at this point where the local government isn't filled with a bunch of anti-American trash. Counties that voted 60-70% Trump in 2016 and are surrounded by counties with similar voting demographics is the ticket for me. I want a BIG buffer in case some libtard migrants with their remote jobs try to crash the place and demand it become more "progressive." I also want a big group making the same libtards feel VERY unwelcomed in town.

Hopefully that buffer will hold until some sort of separation occurs and then these "progressives" can be turned away at the border and denied entry.
 

TheFinalEpic

Pelican
Gold Member
If you want to see what giving tenants too much power does, look no further than us Canadians. Tenants can get away with murder and the courts will still not issue an eviction.
 

paninaro

Kingfisher
I've been a landlord in a very tenant-friendly jurisdiction. I've found two tricks that work well:

1. Rent only higher-end properties. You're less likely to have bad tenants if they are a married, educated professionals, and lower-end tenants can't afford the rent so I can disqualify them based on financial unworthiness.

2. Learn the system in advance. If rent was a day late, I'd be filing in landlord-tenant court already. You can always stop the process by not showing up in court (as landlord) and it gets dismissed. The point is to start the gears in motion immediately, since it takes weeks to get a court date. This way a small problem doesn't have time to turn into a big problem.
 
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