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by FiatLuxDave
4047 days ago
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I was in a similar situation a few years ago, before the 2008 housing bubble crash. I grew up in a beachside Florida town, where the prices had literally never gone down since the founding of the town. I was worried that I would never be able to buy here. I was really worried that what looked like a bubble in 2003-2007 was going to turn out to be permanent, and lock me out of owning in my hometown forever. I felt stupid for not buying into the rapidly rising prices as early as possible. But I worried and waited, and rented and saved. It turned out I was correct to do so. The housing market crashed and I was able to pick up a large house in a great neighborhood for $200k. The two things that really convinced me that the real estate bubble was indeed a bubble were these: a) I had friends who were able to make a better living flipping houses than I did as an industrial physicist, and b) the rental rates were not growing nearly as fast as the housing prices were, which indicated that all those houses bought as investments were unlikely to pan-out as good investments long-term. I don't know much about the Toronto market. But I'd recommend keeping an eye on the difference between growth in rental prices and growth in property prices. They are rarely the same. Yes, foreigners are willing to take some losses to keep their money safely out of their home country, so the situation isn't the same as in 2007. However, the purpose of their investment is to keep their money safe, and so like all bubbles, when the prices start to fall there will be a rush to another safer asset class. So, you probably aren't screwed long term, just short term. If you see the bubble, so does (almost) everyone else. You can buy and try to time the market if you want risky returns. Or you can rent a house for now and then buy a nicer one after the crash if you want to just get a good deal on housing for your money. |
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http://www.dce.harvard.edu/professional/blog/how-use-real-es...