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while I partially agree...
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Posted by James [Email] (more from James) on Thu, 25 Nov 2010 19:04:42 Share Post by Email
In Reply to: Echo bubbles, Reality, Thu, 25 Nov 2010 09:51:35
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that there is a bubble aspect to this, there are a few differences:

1) not all bubbles are the same size. Some blow up bigger before they pop.

2) a bubble in the value of something you live in is different than a bubble in a less tangible item like a stock. You can sell all the stock you own + hold cash. If you sell all the house you own, you've gotta buy something to live in... desirable places to live tend to hold their value fairly well...

3) while there are some moderate to high risk mortgages in Canada, the number is much less, so fewer people risk going upside down. That means less of a snowball effect (see #2)

4) housing in non-central-urban areas is still pretty affordable.

As I understand it, our mortgage rules have resulted in a reduced amount of speculative investments in housing vs the US. Speculative "house of cards" purchases are the most dangerous factor (+ will likely bankrupt those people if rates go up). It has happened, but the extent is not the same as in the US, so I don't anticipate a bursting of the same magnitude.

Personally, even if the housing market was to tumble, I am in no danger of being upside down on my house because I am conservative with my finances... actually, this boom is frustrating for me, as I am not willing to "invest" as heavily in real estate as the rest of the market, so to a large extent, we are delaying renos, or upgrades until things settle down a little. There will be a correction, but I don't think it will be drastic.

fwiw, I have a little first hand experience in bubbles having worked for one of the biggest bubble companies in history + having pointed out to many colleagues from essentially day 1 I worked there that it was a massive bubble that would eventually burst... did it ever!

James...

posted by 216.59.24...

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