Recession just around the corner?

[fredw]

Lost my ass on stocks after 911, till then a steady buildup... Would I ever put my trust back in them ....NO

 

[arff]

Lol. Not sure if interesting is the right word for this thread. It is very apparent that a lot of the comments are being made by some younger guys who have gained their opinions based on their limited experiences. It's to bad that a lot of people have to make the same mistakes others have made, then realize to late that the formula for success and a healthier financial situation for their families was possible and attainable. I think a lot of guys think they're smart enough to take short cuts (cause they're smarter than everyone else) and guaranteed investments like real estate are way to slow, and retirement , early or otherwise isn't on their minds yet, just having everything they want right now. Real estate will always , always gain huge equity from appreciation over the long haul, again, you need a plan when you buy it, you'll never lose money on real estate if you sell according to the plan you made, if the market isn't right, don't sell, wait till it works for you.
My thoughts are not that people can't afford to buy, I believe they can't afford to rent, not if they could see into the future.
Example , A house sold in our city in 1984 for $68500, That same home sold this year for $316,000. And the people lived in it during that time. In that 30 year period the price went up and down a few times, but still gained a quarter of a million dollars , while they lived in it. I actually know the family that built that home in the mid 60's, they spent $11,500 building it . They did ok also. My folks bought a home for $6500 in 1965, they sold it in 1973 for $24000 bought one for $37000 today it's worth $280,000. It amazes me that people keep saying that this present situation of appreciation and increase can't continue, the same as pessimists have been saying annually for god knows how long, but it keeps rolling along.
Maybe this time you gloom and doomers are right................ But I don't think so.
There are a lot of investments that can generate income and gain equity, and its great to be diversified, but I believe real estate is the safest, long term.

Very true.


Also renters are great when you own rental properties,,,,

 

[deaner]

The guy who sleeps the best and worries the least is the guy who has no debt. Always has always will. Particularly so if your house is paid for. Every pay check that rolls in is (after expenses) yours to enjoy. Bank it, vacation with it, what ever you want. Sure, you real estate gurus might have lots of wealth but when you leverage one property against the other it's not as rosy as it appears. Lots of people have gone bust on real estate too, remember it only has value if someone wants to buy it. If interest rates rise (and they will) that affordable property becomes unaffordable fast. If you've got the resources to buy several properties and rent them out, and economics allow you to do this long enough, then you'll be rich. But in the meantime, you get to worry about everything from banks to taxes to deadbeat tenants.
my line of work has taught me that life is short and can be fragile. Worry kills more people than work, and it's been my experience that the more money people have the more they worry about money. I'm debt free and loving it.

I couldnt agree more, and this is the direction I am going. Is it the best financial strategy? Probably not. Could be leveraged alot more. But man I sleep good at night knowing that if everything crashes my family is safe.

 

[deaner]

LOL. Twice. Arrogance like yours has lost millions. $68500 in the markets could have dwindled to nothing or vanished completely in one of the 7 or 8 corrections since 1984. I know a few guys that chose the stock market as a career, started with a whole stack of cash, a couple of them lasted a couple years ish before they got sick of researching and sitting at a computer 12 hrs a day trying to sift thru what's real and what's planted. We have a few doctors in the area that all used the same broker, really sharp,guy in the last stock slip, they invested huge, now they're 60 +and back to seeing patients everyday. A couple of these guys actually left and started new careers with a few bucks left. These were smart guys, not some dufus from BC banging on a snowmobile forum. Lol.
But you're partly right , maybe Not totally stupid, There are a lot of people who made lots of money on stock market, but reality is the big scores, most of them were somehow invited in on the ground floor of a sale of stocks that was manipulated from the get go. One down side to stock market is that for every dollar one guy earns, some other sucker has to lose it. If you have a method of insuring you're the guy earning the dollar instead of losing it, share it, you'll be famous. Of course if you knew how to do that, I suspect you're already rich beyond your wildest dreams. The one buddy, who played the market for almost 3 years, he lost a bunch, is retired now, he had quite a few real estate holdings. He sold a couple, we talked a while ago, his plans are to enjoy retirement and sell one of the couple homes or commercial properties he has every couple years and enjoy he proceeds.
Your scenario problem, It's all the same money, one guy makes money on another guys loss. Talks cheap, so's the paper you own.

You only lose in the stock market if you sell. And Im not advocating some fancy stock picking system. Index funds or a wide enough selection of solid blue chip stocks. But people have to realize it is a LONG TERM investment. If the market goes down dont panic and sell. And dont get me wrong, Im not a stock broker. I have a finance background and now work in real estate. At the end of the day invest in whatever you want but at least look at things objectively. Everyone has that anecdotal story about their friend who lost tonnes in the stock market, or that friend that made it big in real estate. Dont base investment decisions on that.

 

[X-Treme]

Banks can't afford to let a recession happen. Everyone is leveraged so much nowadays, that if the banks raised interest rates too much, they're gonna be sitting on SOOOOO much real estate (and toys) that is all worth nothing. Who is gonna pay ridiculous payments on their half million dollar house that is now worth a quarter mil. They'll just walk away and rent. Just my opinion tho.

 

[fidorama]

Banks can't afford to let a recession happen. Everyone is leveraged so much nowadays, that if the banks raised interest rates too much, they're gonna be sitting on SOOOOO much real estate (and toys) that is all worth nothing. Who is gonna pay ridiculous payments on their half million dollar house that is now worth a quarter mil. They'll just walk away and rent. Just my opinion tho.

Its happened before, what makes you think it cant happen again?

 

[X-Treme]

Again, in MY opinion, people have NEVER been leveraged in the past, the way they are nowadays. I would think that greater than 50% of people have 90% of their paycheck spent before they even get it. What is the bank gonna do with a $14,000 snowmobile that has $17,000 owing on it over 7 years, and that they can only sell it for MAYBE $11K? Or, if a recession does in fact happen, what are they gonna do with a house that's now only worth $300K, but has 5 or 600 owing on it? If they leave interest rates low, home owners will stay in that house, and continue making payments, and eventually get that house back up to what they paid for it. Raise rates, and homeowners will walk away and go rent for 1/3 their mortgage payment. That's what I think. I just really think that banks cannot afford it, moreso than the average Joe Blow.

 

[DRD]

Our banks may not want it to happen but they may not have a choice. On a global scale our Canadian economy is less than California, a big correction in Ab would be like a rounding error.

 

[rzrgade]

You only lose in the stock market if you sell. And Im not advocating some fancy stock picking system. Index funds or a wide enough selection of solid blue chip stocks. But people have to realize it is a LONG TERM investment. If the market goes down dont panic and sell. And dont get me wrong, Im not a stock broker. I have a finance background and now work in real estate. At the end of the day invest in whatever you want but at least look at things objectively. Everyone has that anecdotal story about their friend who lost tonnes in the stock market, or that friend that made it big in real estate. Dont base investment decisions on that.

I have a question for you.
If Bernie Madoff can fool the whole market with a simple piramid scheme for year after after year,and steal billions of $$$ ,how can the average guy trust it ?
People like him can't touch my real estate,and I like that......

 

[Bogger]

Its happened before, what makes you think it cant happen again?

Again, in MY opinion, people have NEVER been leveraged in the past, the way they are nowadays. I would think that greater than 50% of people have 90% of their paycheck spent before they even get it. What is the bank gonna do with a $14,000 snowmobile that has $17,000 owing on it over 7 years, and that they can only sell it for MAYBE $11K? Or, if a recession does in fact happen, what are they gonna do with a house that's now only worth $300K, but has 5 or 600 owing on it? If they leave interest rates low, home owners will stay in that house, and continue making payments, and eventually get that house back up to what they paid for it. Raise rates, and homeowners will walk away and go rent for 1/3 their mortgage payment. That's what I think. I just really think that banks cannot afford it, moreso than the average Joe Blow.

My wife and I were talking about this as well.... if interest rates were to jump to 6% it would SUCK for us but still easily manageable, at 10% I'd be a little worried and at 15% we'd be in trouble..... BUT I'd guess by that time 1/3 to 1/2 of Canadians would be bankrupt. I do not believe that the bank of Canada will allow another early 80's jump to happen. When in fact rates begin to rise it will have to be at a slow pace so that the fall out is manageable. Those closest to the ceiling will be the first to get hit, with prime at 3% a 1% increase will result in a 33% increase in interest payments so the monthly payment on a $350K mortgage will increase $300, @ 6% it would increase by $875, can people afford this? I'm sure some can and some can't, remember federal rates effect all of Canada not just Alberta. Can the factory worker in Ont. afford that? the teacher in New Brunswick? the Nurse in Vancouver?

The Bank of Canada is in a little bit of a pickle, at some point the rates will have to increase however when they do the carnage needs to be manageable, so I believe it will be baby steps over a substantial period of time. If my mortgage payment were to increase by $3000/month (10% rate) I could cope.....but how many others could?

 

[Bnorth]

My wife and I were talking about this as well.... if interest rates were to jump to 6% it would SUCK for us but still easily manageable, at 10% I'd be a little worried and at 15% we'd be in trouble..... BUT I'd guess by that time 1/3 to 1/2 of Canadians would be bankrupt. I do not believe that the bank of Canada will allow another early 80's jump to happen. When in fact rates begin to rise it will have to be at a slow pace so that the fall out is manageable. Those closest to the ceiling will be the first to get hit, with prime at 3% a 1% increase will result in a 33% increase in interest payments so the monthly payment on a $350K mortgage will increase $300, @ 6% it would increase by $875, can people afford this? I'm sure some can and some can't, remember federal rates effect all of Canada not just Alberta. Can the factory worker in Ont. afford that? the teacher in New Brunswick? the Nurse in Vancouver?

The Bank of Canada is in a little bit of a pickle, at some point the rates will have to increase however when they do the carnage needs to be manageable, so I believe it will be baby steps over a substantial period of time. If my mortgage payment were to increase by $3000/month (10% rate) I could cope.....but how many others could?

Great points. These are the things I worry about and that piss me off when the older generations say that the younger generations should be able to buy a house no problem. The average house price in Calgary this year is $460k. Can I swing that? Yeah I can but it will be uncomfortably tight if interest rates rise even a few percent. Not to mention the loss of equity when interest rates increase and the housing prices slump.

 

[LennyR]

You only lose in the stock market if you sell. And Im not advocating some fancy stock picking system. Index funds or a wide enough selection of solid blue chip stocks. But people have to realize it is a LONG TERM investment. If the market goes down dont panic and sell. And dont get me wrong, Im not a stock broker. I have a finance background and now work in real estate. At the end of the day invest in whatever you want but at least look at things objectively. Everyone has that anecdotal story about their friend who lost tonnes in the stock market, or that friend that made it big in real estate. Dont base investment decisions on that.

Good luck working in Real Estate. IMO, not trying beat this to death, and I do believe in diversification, But there is a reason it's called REAL Estate. It'll always be there, different condition, different color , different usage, but it is tangible. The situation of the owner and amount owing or not changes but it won't just ever go away. And people HAVE to buy or rent real estate, they don't HAVE to buy stocks, and lots of stocks actually disappear, just gone.
Sorry, still don't believe there is any safer investment, long term than real estate.

 

[pistoncontracting]

And people HAVE to buy or rent real estate, they don't HAVE to buy stocks, and lots of stocks actually disappear, just gone.
Sorry, still don't believe there is any safer investment, long term than real estate.

For the most part, I can see your point. Up until you said this.
How do the numbers of people in gov't funded houseing compare over the last... 50 years??

I agree that every generation think s they have it worse then the last, and use it more for excuse. BUT, to think that we are NOT going into a very rough water could be very ignorant to say the least.

People that think that banks won't foreclose and repo toys and homes were either born yesturday, or have an extremely bad memory. It happened in 2008, and will happen again. They foreclose the home, auction it off, and there army of lobbyists will get as much, or MORE of the difference from the gov't.

Banks in Canada were bailed out to nearly the same extent as American, it was just done quietly. Thats all fine and good, but were is all the money coming from?? The Americans are trying to print there way out of it, knowing full well it is not going to work. Some may argue it is only going to magnify the problem.
Canadians are trying to give our resources away at a higher rate, in hopes of outrunning the storm.

And the folks that think they can handle there debt, even if things go up a little bit, don't be so sure. The banks know full well who to go after, and it's generally NOT the people you would think. The folks that get hit the hardest are the ones with moderate debt and more equity in things... you know, the people who they can actually get something out of, and who are likely to rebuild and keep the lending cycle going.

The only people who are immune to any of this don't waste there time telling people there way is the best. They manipulate the market to FORCE the rest of us into proving them right.

Nothing more, nothing less.

 

[800HMX]

There are times when the stock market is the place to be, other times it's bonds or real estate and sometimes they all work and sometimes they don't. It's pretty hard to get any one of them right in the short term, but the good news is that they all work, and work well in the long run (as LennyR mentioned in the housing market and as Deaner said in the stock market). I really think we need to be practical; save some money, invest some money and spend some money. The key is to live inside what we can "really" afford today and tomorrow.

It will always make sense to own the home you live in. It doesn't make any sense to buy a home you can't afford or live a lifestyle that isn't sustainable. People in their 40's taking out a 25 yr mortgage doesn't make any more sense than someone in their 20's or 30's buying a $400-$500,000 house with only 10% down. Families with $4000 monthly payments on an income of $120k/yr -no sense either. There is so much risk and so little net worth to gain in any of these situations. How much money are any of these people saving-$500, $1000 or even a few thousand dollars per month - you just won't get there unless you started real early. Too many payments and too much interest. People just need to be more realistic about their expectations!

 

[pfi572]

Well said my friend

 

[Marley]

All of this is interesting but there are only a few ways to be sure: work hard and don't blow your money, insider trading, or get lucky.
Everything else is just an assumption.

 

[MADMAN]

Well for me, until, if or YES, when it comes, I will stay working my C$%T off. Simple as that yup! No other choice!

 

[rzrgade]

I think a lot of this boils down to home owner ship vrs renting/other investments. I am bewildered at the thought process that I don't owe anything IF I am renting..lol YES you do ! You need a roof over your head no matter what you do....the difference is a mortgage ends,rent never ends...ever unless you buy.

So what do the #s tell us....let's compare :

Renting : average single family home in Edmonton 2300$@month.
25 years x 12 months x 2300$ =690000k
this DOES not include the ever increasing cost of rent!
At this point in time you have 0 equity....none , nada zilch.

Buying a home :average home 400 k ,similar to the rental home.
with 10% down (40000) you would borrow 360000$
at 4% interest rate average your payments are about 2067$@month.
CHEAPER THAN RENT!!
IF you go the full term on a 25 yr term you will pay back 570064$
,much less if you can pay it off sooner....
Let's say ,assuming house prices rise 4% per year,over 25 yrs and your house was worth 400000k when you bought it.
so now it's worth a staggering1066344$ .
At that time you will have well over a million in equity, in your home....

So the difference is mind numbing, is it not.....
These are current justifiable #s for the short to mid term future.

For the nay Sayers (lol)No matter what house prices do,simply put you will be hundreds of thousands of dollars
better off buying a house.....it really is that simple.

 

[pistoncontracting]

I think a lot of this boils down to home owner ship vrs renting/other investments. I am bewildered at the thought process that I don't owe anything IF I am renting..lol YES you do ! You need a roof over your head no matter what you do....the difference is a mortgage ends,rent never ends...ever unless you buy.

So what do the #s tell us....let's compare :

Renting : average single family home in Edmonton 2300$@month.
25 years x 12 months x 2300$ =690000k
this DOES not include the ever increasing cost of rent!
At this point in time you have 0 equity....none , nada zilch.

Buying a home :average home 400 k ,similar to the rental home.
with 10% down (40000) you would borrow 360000$
at 4% interest rate average your payments are about 2067$@month.
CHEAPER THAN RENT!!
IF you go the full term on a 25 yr term you will pay back 570064$
,much less if you can pay it off sooner....
Let's say ,assuming house prices rise 4% per year,over 25 yrs and your house was worth 400000k when you bought it.
so now it's worth a staggering1066344$ .
At that time you will have well over a million in equity, in your home....

So the difference is mind numbing, is it not.....
These are current justifiable #s for the short to mid term future.

For the nay Sayers (lol)No matter what house prices do,simply put you will be hundreds of thousands of dollars
better off buying a house.....it really is that simple.

If one is going to stay put for at least 10 years, and by some chance you are approved with only 10% down, it makes sense to buy. But it's a mentality like your that led to much of the housing crash we just seen.

There is absolutely NOTHING wrong with renting. It is far easier to walk away when renting. It is not so easy to walk away from a mortgage. And when people can't afford to by a TV with cash, how in the hell are they going to come up with 15 or 20% down??

Some people don't want the added expenses of home ownership either... like cost of repair, and everything else that comes with it.

So no... home ownership doesn't always make more sense. The same arguments could be used as to why most people don't want to be self employed, over being an employee.

And besides, if everyone owned there home, there would be no one left to rent too...

 

[rzrgade]

I realize it is not easy,but nothing that can change your life financially that much never is.....
i am older, and I can't tell you how many people have said to me. "Wish I had listened and bought a house instead of toys when I was young"

this is is not a slag on renters, it is just valuable lessons I have learned over the years..
Everyone has free choice !
Also if you think it's hard going out to make cash to pay the rent now, wait till your old...