Quote:
Originally Posted by jasonturbo
Ahhh this thread marches on, totally polarizing.
Ultimately home ownership/investment is binary, you're either in or out, red or black.
From a perspective of risk management you have people willing to take on no risk (renters) and people will to take on massive risk (Buyers with very little equity in a very expensive market where obtaining your mortgage would be impossible if interest rates weren't so low). Perhaps if housing (for 90+% of the population) didn't make up the entirety of their net worth, home owners could actually consider and manage the risks associated with ownership/investment. Perhaps if this opportunity existed you would see a more balanced market with more reasonable appreciation/depreciation.
So long as you understand that you're not managing or mitigating risk being a highly leveraged home owner in an extremely expensive market, then at least you're being honest with yourself that you're essentially gambling on real estate. For this reason, and this reason alone I remain a renter, it's the only way I can remain diversified and manage financial risk.
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This is essentially the point. Renters have very low risk, are liquid so they are paying a premium (rent) for that luxury.
It is normal and prudent to be skeptical when you have people (many people in this thread) buying based on FOMO. That is dangerous. You are laughing saying what is a correction? My shit will only go down 20% top? It is not how it works. In a correction scenario, there is the fear of not knowing how far the price can plunge. That accelerates selling and drops price further. Nobody knows if it will go down 10%, 20% 50%. No one. You only knows people selling at a discount left and right. And that could place a psychological toll on you.
If your financial are solid then you can probably survive a correction. The sheep that will be up for slaughtered are the ones who are highly leveraged, bought under FOMO, owning multiple assets with that leverage.
A correction cause a ripple effect thorough the world economy (remember Thailand 1997?) The good news is that the central banks today are so much better equipped at preventing such situation through various tools and knowledge that were not available to them years ago.
Ask yourself if the price plunge 20% tomorrow, what are your plan A, B and C. As long as you manage your risk, you cannot lose. This is not to say that there will be a correction any time soon. You have to take into account the scenario that Vancouver RE simply has not reached its "fair" market value. Just because you cannot afford it, does not means it's overpriced. Remember in the market, there is no such thing as price is too high it cannot go up or too low it won't go down any further.