A tormented real estate market has changed the paths of many people’s lives. For example, in the Condo Capitals of Canada – Vancouver, Victoria and Toronto – tens of thousands of Canadians who thought they’d be collecting profits from flipping properties will instead soon be collecting rent. Unfortunately, in almost all instances, it will not be enough to cover costs.
This article, from the New York Times, gives further insights into people who became accidental landlords or, in some cases, reluctant tenants. — Garth
The housing market morass has created a new class of real estate investors: the accidental landlords. Some, like Mr. Vallance, have moved into new homes and can’t sell their old ones — at least for the prices they want — while others, like Dr. Siqueira, chose to invest in the changing market. Then there are those for whom renting has become a way to forestall impending foreclosure.
No one knows the exact number of unintentional landlords, but a survey a year ago by Completelandlord.com found that nearly one out of five landlords did not plan to rent out a property when he or she bought it.
For many of these people, though, the option of renting out a home is a godsend, enabling them to cover some or even all of their carrying costs while they regroup financially or wait out the market.
Article continues here.
Rent versus buying calculator (NY Times): here
Chart from Calgary Real Estate Market Blog
Hi Garth,
I’m a regular viewer of your website. I find it informative, and I plan to get a copy of your book with the same title.
I live in the Niagara region (Welland) and I’ve noticed many houses are over-valued, even down here. It’s been that way for a few years. I’ve seen many houses on the market for a number of months now, and only a few have lowered their prices. It’s crazy. My wife and I will be looking hard for a little bigger house in the next couple of years. (We live in a semi, that we paid $119,000 for 4 years ago and owe less than $80,000 now) I’m selfishly hoping prices will come down, but many people around here seem to think it won’t happen. Their reason for thinking this way: many people re-locating from the Toronto area with their big bucks will keep prices high, and land is becoming less available to build on. What are your thoughts?
John
As I’ve said for many months, sales volumes have to crash first, then prices will trickle down afterwards. Right now, resales in Canada are off 18%, but prices are down only 2-3% on average, and as much as 10% in certain markets, like Edmonton. We are in the early stages of this correction, and price reductions will be much more dramatic by October. Year-over-year, I am sticking with my prediction of a 15% national dive by this time next year, with some markets off twice that amount. If you want to move up, sell now with a long close, then hold off a buying decision until at least the end of the year.
Dear Mr. Turner:
I am an avid reader of your books and am in the middle of your newest, Greater Fool and I am enjoying it, especially since I have been around real estate my whole life. (My parents were real estate agents in GTA for over 35 years) I am 36 years old.
I am confused however about the following comment made on page 262 of your book called 2020: New Rules for the New Age in the chapter for Personal Strategies as follows: “Remember the folks lined up on Yonge Street in Toronto to buy gold at 1,000 an ounce?” When might this have been? I understand history to only have had gold reach 1,000 in March, 2008. This book was published in 1999 as you know. In the 1980s gold reached 850 an ounce and I understood this to be the highest point until March 2008. (have I missed a piece of history?) Or is this comment just a hunch as to what may be.
I suspect gold will explode.
Anita
Gold indeed hit $850 US, which was $1,000 an ounce Cdn at the time, in 1979 and, yes, people were lined up around the block in downtown Toronto to buy it. Greater fools, of course, as the price soon crashed from that pinnacle. It took almost 30 years to achieve $1,000 again, making this one of the worst investments around. Bullion explode again? Don’t count on it, since the collapse of the US dollar has not sent gold prices skyward in relative fashion. Now, maybe if the US nukes Iran….
Hi Garth:
I would appreciate your opinion re my real estate situation. I am considering a move back east (Kitchener/Waterloo) to where my family is. I live in Coquitlam, a burb of Vancouver. I live in a one bedroom apartment and just received a $16,000 + special assessment fee as the siding needs to be replaced. However, the Strata company has also included a whole ton of other things they’d like to do in that amount – so we are having a Strata meeting to ratify – or not – what they have proposed. There are 42 units in this building which is 26 years old.
Anyway, the figure is out there… and it will cost a lot to redo the siding. So, my question is: should I try to sell now or wait? I just read your article about the change in mortgage rates as of Oct. and this has me more concerned. I know I would have to pay for the assessment, plus I don’t want to have to take a loss on my apartment as well. Should I wait until the work has been done on the apartment and then it would be potentially worth more… or sell now?
BTW, I am unemployed now – was laid off a few months ago – so would also be looking for a job out east (and am looking now). Your thoughts? Wisdom?
Frances
Too late, dude. You have to disclose this assessment request when you list the property, and certainly if you get an offer this information will be made known during the purchaser’s legal investigation. Your selling price will have to reflect the cash outlay required by the strata board. As for selling, you definitely do not want to wait.
Garth,
I sent you an email via your greater fools site, not sure if you got it. I have just read your book again and I say you are bang on. I’ve also read your blog site and find it frightening at how some people really disregard what you have to say.
I too got caught up in the real estate frenzy and sold a small townhome in 2006, and then got scared and bought a small (fixer upper innter city house that could flood, etc. as the the neighbors I learned had sump pumps installed) in May 2007. I like many, thought the US meltdown would never occur here. Further, my realtor told me prices may stabilize but they will only go up. Then I read your book and did some digging for myself. I found most of what you said is absolutely true in the searching I did. It took me years to get a proper downpayment for my first townhome, which was pretty basic. At the same time, everyone around me was buying and upgrading to McMansions with talk of low interest rates, stainless steel gloss and that granite, not to mention those brazillian cherry hardwood floors!!! And these were all nurses – just like me, many of them single just like me. Some even bought second properties in Calgary to rent out. I got out of the bubble in 2006 when things started to go crazy in Calgary, but got scared as things just kept going up and got back in. Big mistake!!!!
I decided to get out of this crazy boomtown and put my house on the market in April, and it sold 5 weeks later with a 30,000 loss. However, I got out. Fortunately, I have my home proceeds of 200,000 to set aside and fortunately in addition to that, while everyone was paying down their McMansions, I salted away another 1/4 of a million in RSPS and savings.
I have moved to rural B.C. close to Vancouver and currently rent. Someone this morning told me prices may go down 10% maybe here, but no more – it’s too good of an area for that. I kept quiet but couldn’t help but think that if the balloon in Vancouver loses all of it’s gas, the one here will too. I am quite sure a lot of the people who own property here also have a principal residence in Vancouver.
I don’t think the crash will be as severe here as in the U.S. and I think from what I’ve read we are two years behind the U.S. But the crash will be hard enough to deliver a severe blow and drop prices quite a bit. Further, I already see listings here that say “hot price” “reduced” “hot new price” “summer sizzling price” – these words in my mind translate into people getting scared and desperate to sell. And a couple I know in Calgary have had their house listed for 3 months!
So that’s my comment – hope you enjoy it. I’ll just sit back now and see what unfolds – and perhaps I’ll be fortunate enough to find a small 1000 square foot bungalow that isn’t like the 700 square foot dilapidated dive I left behind in Calgary.
Cathy
Smart girl. — Garth
