For those of you who don’t have the time to watch a 33-minute video; the second half of the video, here are the questions covered, and the times at which they appear so you can skip ahead…
Question #7 from Appraiser @ 0m 15s
How do you think you have grown as an analyst over the past 12 years. What are some of the more important lessons that you’ve learned.
What would you say to your critics?
Question #8 from Steve @ 6m 22s
Is a hot dog a sandwich?
Question#9 from Hoob @6m 33s
In a fit of nostalgia, I was looking up house prices in the small rural town I grew up in, 2.5 hours from Montreal. There’s a good selection of completely adequate housing in the 70-90G range. I could live there again: under an hour to the nearest city, high speed internet, and generally NOT a complete crapshow.
I’m not a city person. At what point should a pragmatist seriously start considering cashing out of a $1M home/gains in Toronto, locking in a cheap place to live somewhere, and leveraging other growth options instead of RE?
Question #10 from Derek @ 9m 45s
What is your “worst” analysis / prediction, i.e., that did not pan out as you expected?
What is your “best” analysis / prediction, i.e. that panned out as you expected?
In the historical war between housing bears and bulls, what is the worst fallacious attack you see against each side.
Question #11 from Clive O. @ 14m 22s
A question about market data:
Which pieces of data or which stats are your go-to?
Which pieces of data or stats should be the most important and most accurate in our market?
Which pieces of stats or data have been the most counter-intuitive or incorrect during the recent real estate boom?
Thanks so much!
Question#12 from Max 20m 32s
Here’s what I’ve always wanted to ask a real housing analyst:
1) Why do the curves of both appreciation in housing and wage growth continue to diverge for a second or third decade? Is this no longer concerning?
2) Why does the ratio of household debt to income continue to grow every year but real estate prices continue to appreciate? When this ratio hit 150% the alarm bells sounded. Not as much noise was made when the ratio passed 160%. Ditto for 170%. Does this measure matter anymore? Ben, what happens if and when we cross 200%, both in theory and in practice?
Both these questions I’ve learned from reading David’s blog over the years. He’s addressed the meaninglessness of these measures a few times and I want to know is he’s on point.
Cheers!
Question #13 from M 27m 17s
Evan Siddall’s term is up this year. Do you have an idea on who could be his successor, and any conclusions we can draw from this appointment with respect to future government RE policy?
Kyle
at 8:59 am
Just to clarify it wasn’t me who had the bet with Housing Bear, i’d definitely welcome him to come back as well.
Bal
at 10:36 am
Housing bear had bet with Appraiser…:)….i also like housing bear..may be I am myself bear and that is the reason I like them..lol..
Bal
at 10:37 am
David….by the way you didn’t select my question????
David Fleming
at 12:35 pm
@ Bal
Sorry about that! Your comment was outside the original thread so I didn’t see it.
I think Ben covered the idea of “when to buy,” using the analogy, “how long is a piece of string?” It means that there is no ONE answer; it all depends on the piece of string, which are of all different types and lengths. Same goes for buyers, and without knowing more about the buyer, their age, income, job, savings, credit, down payment, living situation, etc., etc., he can’t really advise.
The idea of builders raising their prices is an interesting one. This happens a lot, as we known, espeically with condos. It’s not price-fixing, but rather price-coordination. All builders do it, and thus buyers have no option to value-shop. I don’t advocate the purchase of pre-construction, so this is just another reason to add to the list…
Bal
at 4:01 pm
David – Thank you for the response….Greatly appreciated.
Kyle
at 11:30 am
Thanks for doing this series David,
I quite enjoyed it. And i will say i haven’t really followed Ben much in the last few years, but his tone and views are much more balanced, thoughtful and realistic than what i used to recall reading from him. Also good questions from many of the readers.
Mike
at 2:27 pm
Re: next week’s guest that you teased on the home page, I think Chris and Derek are just praying it’s John Pasalis.
Derek*
at 2:48 pm
Ha! I really hope it is Verbal Kint.
RPG
at 4:13 pm
Anything short of Evan Siddall for a CMHC exit interview, consider me unimpressed.
Kyle
at 4:31 pm
I would like to see Garth Turner. I have some questions for him.
Chris
at 3:24 pm
These were awesome, David! As Condodweller said the other day, the chat style videos are really good, great to get some back and forth discussion.
Also nice of you to recognize that, although you may not always agree with him, Rob Carrick is a smart guy who is primarily discussing financial responsibility.
@Mike, an LG (John Pasalis) video would probably be another hit!
Chris
at 4:09 pm
“Canadian economy likely in deepest recession on record, will only recover modestly over coming years: poll [of 25 Canadian economists]”
https://www.theglobeandmail.com/business/economy/article-canadian-economy-likely-in-deepest-recession-on-record-will-only/
Many of the more bullish commenters here thought only a major recession would bring the real estate market down. There now seems to be little doubt that a major recession is exactly what we’re facing.
Bal
at 4:50 pm
Chris- if we are facing a significant recession….why the stock market is going so high and honestly I also see houses selling in my neighbourhood….something is not making sense
Chris
at 5:24 pm
Bal, I don’t think anyone can say with certainty why the stock market moves the way it does. However, keep in mind that we’re talking about a deep Canadian recession. The global equity market is probably not all that concerned about how our national economy does, as we’re a relatively small part of the world economy.
And there are of course still homes selling. Just far fewer today than at this time last year.
David Fleming
at 9:06 pm
Let me chime in here…
The DOW Jones hit 18,000 in March and has since surged back to almost 25,000. This is not a function of the future of the American economy. This is a response to the average American listening to Donald Trump, and assuming that the Coronavirus is harmless, or a Democratic hoax, or that drinking bleach can cure you of it. If the DOW Jones truly reflected what lays ahead for this country, it would be at 15,000.
The stock market does ebb and flow with the economy, but it also moves with consumer confidence.
Asked why he thinks the virus could just go away without a vaccine, Donald Trump today responded: “It’s gonna go. It’s gonna leave. It’s gonna be gone. It’s gonna be eradicated.”
People believe that.
That is why the DOW Jones currently sits at 24,833.66, and not 14,833.66.
Chris
at 9:35 pm
David, I agree with you that the stock market does seem to be a touch exuberant, particularly as the American economy isn’t faring much better than ours, and their public health situation is much worse.
However, where you say:
“This is a response to the average American listening to Donald Trump, and assuming that the Coronavirus is harmless, or a Democratic hoax, or that drinking bleach can cure you of it.”
I’d push back on that a bit. I think we see media reports of people protesting shelter-in-place orders, and yelling that Covid is a hoax (while open carrying their AR15 and waving a confederate battle flag), and assume this represents many Americans.
In fact, most of our neighbors to the south seem to support the measures being taken to mitigate the pandemic:
https://www.npr.org/sections/coronavirus-live-updates/2020/04/23/843175656/8-in-10-americans-support-covid-19-shutdown-kaiser-health-poll-finds
The stock market probably reflects confidence that things will get better soon, and maybe this is overly optimistic. But, I think the majority of Americans are smart enough to know that Covid-19 is a real threat that has to be taken seriously, so that we can beat it as much as is possible, and get back to some semblance of normality.
J G
at 9:51 pm
Hi David, that does not matter. The government will always print money to avoid depression.
Just like I agreed with you that Toronto RE prices will recover in absolute value before next spring, the stock market will roar on. In 08, the Fed on bought bonds, now they are buying stocks too!
Btw, everything I bought in late March are already up at least 25%. I believe this was a once in 10 year opportunity.
Thomas
at 7:32 am
Apparently, fed buying stocks has been a major reason. I expect some correction as more earnings are published. It might be Q3 or Q4.
And a second wave looks more likely as states reopen (I think a bit earlier than they should)
Chris
at 8:25 am
Good points J G and Thomas, unlimited QE is also likely having a significant impact.
Appraiser
at 8:38 am
@David: I have to agree with your assessment of the MORONOVIRUS.
The tangerine turd has a rabid following, I’ll give him that, probably hard-core 30% of U.S. voters. But like Chris’s assessment of the pandemic – I’m hoping most Americans are no longer fooled by this aberration of all that is rational and real. Please tell me I’m not wrong.
The equity markets are always a bet on the future, which investors currently appear to think is ok at best. The Dow is still down -17%, the S&P 500 -13% and the TSX -15% from February.
I agree that a continuation of this rally makes about as much sense as the ghoul currently occupying the Oval Office (or a quick rebound in real estate).
But I have to admit, I was dead wrong about F–kface Von Clownstick (thank-you Jon Stewart) once before.
Verbal Kint
at 8:49 am
Such a bad take. Among individuals, stock ownership is VERY concentrated among the very rich in the US. The average American doesn’t move indexes at all anymore.
J G
at 9:16 am
It’s not about Trump. You have to live in a Republican state for some time to see Americans love their liberty like how they love football, hamburgers, and guns. And some of them are very rich too! They’ll make racist/offbeat comment like it’s nothing, quite different than Toronto.
@Appraiser, you would be down 15% if you bought your ENTIRE portfolio in February 2020, which was very elevated. Stocks go thru crashes a lot faster than RE, and it’s a lot easier (at least for me) to make money off it.
Elle O'Lell
at 9:39 am
Disagree David. It isn’t about Trump voters, they don’t have enough money.
It’s about big daddy Jay Powell making the printers go brrrrrrrrrrrr
https://imgur.com/gallery/JB91JT4
David Fleming
at 10:41 am
Donald Trump has tweeted/re-tweeted 78 times in the past ten hours.
Since the U.S. death toll surpassed 60,000 yesterday, Trump has tweeted about: Michael Flynn, CNN, MSNBC, Brian Williams, Don Lemon, Joe Scarborough, Sweden, Roger Stone, his poll numbers, Jim Comey, Hillary Clinton’s campaign, Rep. Jim Ryun’s birthday
The man is unhinged. If I were living down there right now, and this was my leader, I would be afraid.
Although apparently, Donald Trump isn’t the real president:
https://thehill.com/homenews/administration/495270-insiders-describe-kushner-as-de-facto-president-who-played-key-role
Chris
at 11:00 am
No mentions of Obama in the past ten hours from him? That’s surprising.
Anyways, I don’t think you’re going to find anyone here defending Trump. He’s completely out of his league, and hopefully starting to realize that you can’t “Art of the Deal” a virus.
I just don’t think his hollow words regarding the pandemic are primarily responsible for driving the stock market upwards. Most Americans seem not to align with his views on Covid-19.
And, as others have pointed out, many of the rabid Trump supporters, who are most likely to believe the President’s statements, aren’t in an income bracket where they are able to have a substantial portfolio.
But I agree, definitely happy to not have him as our leader. Before this as well, but especially during the pandemic.
condodweller
at 11:06 am
Regarding Trump, it is clear that he is being managed. Recently though things have gotten worse therefore I question his mental state. Not in the sense the general public has been calling him crazy but in medical terms. I wonder if he is developing some form of dementia or some form of condition that reduces his reasoning abilities. I mean this fiasco with recommending on live TV that people inject bleach is simply insane.
Regarding markets, I have to agree with those who disagree David. As experts frequently describe it, markets climb a wall of worry. Even if there is bad news, as long as the news is known and a way out can be seen markets will climb. What markets don’t like, and when they fall, is uncertainty.
I believe the reason we saw that big initial drop was due to the uncertainty of what the pandemic showing up in the US and mass closures would do. As soon as the rescue packages were approved by government markets turned and started recovering. The reason they have not regained the Feb high is because “it” knows that there will be a hit to the economy due to the closures.
I suspect there may be another dip as companies start to release their Q1 numbers which will be significantly lower, obviously, then their previous quarter.
Appraiser
at 1:33 pm
@condodweller: So you’re of the opinion that your 10-year old “don’t buy real estate ” warning is looking pretty good right now?
In April of 2010, detached homes were selling on average for $462,000, semi’s were going for $374,000 and condos sold for $279,000.
In April of 2019 they averaged $1.08M, $809k and $588k respectively.
Really?
condodweller
at 2:08 pm
I never said don’t buy real estate but thanks for coming out…
Appraiser
at 7:03 pm
@condodweller: Her’e a direct quote from one of your posts today,
“J G above has hit the nail on the head as to why us “bears” have been warning about buying homes during the past 10 years.”
condodweller
at 7:19 pm
warning yes, I have never categorically said do not buy a home or investment property.
I have always maintained over the years I have been commenting here, which I don’t think has been 10 years to be fair, to consider that prices are at record highs and purchases require increasingly large mortgages which means people are taking on increasingly larger risks. I also said that IMHO the higher the prices climb the bigger the drop will be when whenever a trigger happens.
Chris
at 8:20 pm
“I have always maintained over the years I have been commenting here, which I don’t think has been 10 years to be fair”
Pretty easy to assess. Earliest comment by “condodweller” seems to be this one, dated February 18, 2015:
https://torontorealtyblog.com/blog/soooo-you-want-to-list-with-a-discount-brokerage-do-you/#comment-52091
Thomas
at 7:42 am
For the game, my guess is that the prices will bounce in June/July 2020 and then fall again later in the year. It might take another couple of years for the prices to bounce back again
Chris
at 8:22 am
So is your guess that GTA average price will re-attain $910k in June/July? Or are you thinking a more modest bounce this summer, and a couple years (say 2022?) to get back to the Feb 2020 average price?
Thomas
at 9:28 am
I think there will be a flurry of activity immediately after the market reopens and it will probably reach the $910k in June/July. It will steadily drop by 15 to 20% after that and will take another couple of years (or even more) before it gets back to $910k.
Having thought about it again, it will be quite difficult to to reach the $910k mark. The reasoning is that luxury home sales will not pick up. I would expect the people with money to only wait and watch by the sidelines (except for a few opportunistic deals). And of course a second wave would seriously muddle the waters
Chris
at 10:32 am
So are you going with June/July 2020 for $910k? Or did you want to place your bet for a later date?
Ron Butler was talking the other day about how he thinks we’ll have a big uptick in sales volumes in summer; didn’t speculate on prices. But he thought things would then slow down further in the Fall as unemployment, lost income, etc. starts to bite harder.
Thomas
at 11:35 am
I will stick to June/July 2020 for $910k just for the fun
Chris
at 11:58 am
Sounds good, Thomas! I’ll put you down for June or July 2020.
David Fleming
at 12:27 pm
Ah wow, I’m no longer atop the list!
Chris
at 12:43 pm
You’re still up there, David, but now there are a few who are ahead of you. Although, you did revise your guess – your original one would have put you just after Thomas.
Here’s the updated list (which you are correct, I have squirreled away in a spreadsheet):
Thomas: June or July 2020
Kyle: Fall 2020 or April 2021
Tony: January or February 2021
David: April 2021
J G: April 2021
Derek: April 2022
Condodweller: Feb 2023
Mxyzptlk: April 2023
Chris: April 2024
Pragma: 2028
Potato: Sometime in the 2030s
Jeff: Never (adjusted for inflation)
Did we ever figure out where Ben’s guess landed? He was a bit non-committal on that one, but sounded like a few years.
Thomas
at 1:53 pm
It feels good to be at the top of a list 😀
condodweller
at 2:14 pm
I still like Jeff’s guess most. Not because I agree but because it’s actually possible and it’s funny how it’s a subtle way to poke the bear….err the bull.
I think as the guest of honour Ben can have two guess, although If I understood correctly he assigned a higher probability to the latter.
But why does Kyle get two guesses?
Chris
at 2:22 pm
Did Ben ever state an actual date? I thought he just said something along the lines of a few years from now, then discussed various factors that would presumably play into it.
We don’t really seem to have any set rules for this game. David revised his guess. Tony picked two months. Potato’s guess is an entire decade. I don’t have a qualm with Kyle’s double guess, but you can hold his feet to the fire to commit to one if you like!
condodweller
at 3:13 pm
I don’t know Chris, I seem to recall at one point he said it could be later this year agreeing that David could be right and then he said a few years. I was going to comment that we should get him to lock in. Not sure if David is in a position to circle back to get a date. I know I’m not going to watch the two videos again.
Regarding Kyle let’s just say I he’s burnt too many bridges by insulting me in the past to talk to him.
Chris
at 4:28 pm
Hey David, think you could get Ben to commit to picking a date? Winner gets bragging rights, and not much else!
Jimbo
at 3:58 pm
You can live in the home and hopefully ride out a downturn, which you can’t do with stocks.
You could buy stocks with 95% leverage in the 1920s and yes there were a lot of people leveraging up back then.
As for Appraisers example from earlier a house went from $462k to $1.08m. If you haven’t sold what have you gained? If you did sell and you still need to live in Toronto that $600k house you wanted in 2010 is now worth $1.52m. So what have you gained?
Here is my thought experiment….
Bought $462k house in 2010 with 20% down and a 3.0% 5 year mortgage (25yt), $1,780ish a month. Renewed in 2015 for another 5 years at 2.54%, $1,700ish a month (20yt). Add property tax on top of that for both payments, I’m neglecting that for simplicity. In 2020 you own a $1.08m house with $829k in equity. Tell me what you do with this equity if you keep the house?
You sell the house for $1.08m to buy that $600k ($1.52m) house you always wanted. In doing this you need to pay land transfer tax on purchase and real estate fee of 4% on the sale. So you are left with $732k of equity.
You are left with two choices, you can roll the equity into your house or cash it out and pay 20% down. If you roll it in you have a new payment of $3,700 a month (25yt 3%int), if you put 20% down your payment will be $5,700 a month (25yt) or $5,400 (15yt) and $8,400 (15yt) respectively.
You could have been paying $2,400 a month plus CMHC fee amortised or if you came up with an additional $28k down payment you could have had that house for $2,300 a month without CMHC fee, so I really don’t see how you are ahead.
I’m just using the entry level trade up example, buying a condo to trade up to a house would be a lot worse and I do know you could have savings on the side to put down if you always planned to buy up, that being said you would need to save $3,700 a month on top of your expenses to come out even on the mortgage side. By that I mean owing $200kish to the bank for 15 years.
condodweller
at 11:21 am
J G above has hit the nail on the head as to why us “bears” have been warning about buying homes during the past 10 years. This made me think of an analogy that perhaps even the strongest bulls might understand. As J G points out no one in their right mind would leverage up and invest all their money as the stock market is hitting new highs.
However this is exactly what people buying their first home are doing and have been doing for the past 10 years. While Kyle has posted recently that he hasn’t met anyone that became wealthy without owning a home (all he’d have to do is look at all the entrepreneurs who started their business from their garage while in university) I would challenge anyone to give me an example who invested their life savings in the stock market in one go with a 95% leverage near record highs.
Having said all that, I’m not categorically saying one shouldn’t do it, because it may make sense for them in the long term, you’d just have to be pretty sure you are aware of all the risks and are ready to accept those risk when a black swan event hits as this pandemic.
Thomas
at 11:34 am
At least in the stock market, one can make systematic investments and most likely the highs and lows will average out over a period of time. In RE, it is usually all in and more. I agree that it will will not cause a lot of damage if one keeps the property for a long period of time.
For immigrants like me, the first home in Canada is not really an investment. It would be more about a home versus a house. And when caught up in that emotion, I have seen many buyers shell out more money for a home than it’s ‘market worth’
condodweller
at 11:48 am
I have said that while “technically” a PR is not an investment, as prices and the resulting leverage increases, it would benefit people to view it as an investment.
BTW to give credit where credit is due while J G didn’t flesh it out I’m sure he was thinking the same thing. Since I am no economist nor a writer I haven’t come up with an eloquent way to put this idea. I think this is the closest I will get.
M
at 12:36 pm
5% down =/= 95% leverage, but rather 20x leverage or 2000%. Only other place main street can get that much leverage is fx.
condodweller
at 1:20 pm
@M I’m no math professor either and I’m not familiar with the =/= operator but according to my math leveraging 95% of an investment is 19x the 5% down payment, which is 1900%.
But your point is well taken that an average Joe would have a hard time obtaining the same leverage anywhere else. This is the X-factor in why bulls call RE the best investment since it’s difficult to beat that sort of advantage. It’s like putting someone is a wheelchair at 95m of a 100m sprint and saying a paraplegic is the fastest sprinter (assuming he can do 5ms under 10s 🙂 )
Appraiser
at 1:39 pm
Aside from being overly pedantic yet again; another shining example of why analogy is the worst form of debate.
condodweller
at 2:06 pm
I find analogies a good way to convey a concept but how about I stick with my form of debate and you stick with yours; which seems seems to be name calling and insult slinging. I guess you were too busy to realize I was actually supporting your position. You should learn to take yes for an answer.
Chris
at 2:18 pm
Condo’s right. You’re not in much of a position to lecture on “the worst form of debate”, when less than a month ago, you were carrying on like this:
“Quoting ZOO-CACA HAHAHAHAHAHAHA!!
Bear-Boner Alert! Bear-Boner Alert !”
– Appraiser, April 4, 2020
https://torontorealtyblog.com/blog/a-real-estate-conversation-with-my-father/#comment-118489
Kyle
at 3:38 pm
@Condodweller
For someone who supposedly is ignoring me, you seem to talk about me a great deal – it’s just plain creepy how you feel the need to mention my name as often as you do
Kyle
at 3:58 pm
” While Kyle has posted recently that he hasn’t met anyone that became wealthy without owning a home (all he’d have to do is look at all the entrepreneurs who started their business from their garage while in university)”
Not sure what you’re even trying to argue here. i have never met Bill Gates or Zuckerberg or anyone like them. You know why? Because stories like theirs are exceptionally rare – which is exactly my point. I’m talking about the quality of the Bulls’ advice vs the Bears’ advice to the general public. So when there are as many wealthy garage entrepreneurs are there are wealthy home owners than come back and talk to me, in the meantime please stop mentioning my name and taking pot shots at me.
Appraiser
at 3:04 pm
HSBC just keeps on dropping mortgage rates:
3yr fixed: 2.64% to 2.39%
5yr fixed (high ratio): 2.34% to 2.14%
Canada’s lowest 5yr fixed rate:
5yr fixed (refi): 2.69% to 2.44%
5yr variable (high ratio): 2.34% to 1.95% (Prime – 0.50)
“One of the best indicators of near-term fixed-rate mortgage pricing is Canada’s 5-year swap rate, and it’s seemingly on a collision course with its March 9 all-time low. It’s now just 7 basis points away, suggesting further near-term fixed rate drops may be forthcoming.”
https://www.ratespy.com/daily-mortgage-report-april-30-043013492
Jimbo
at 6:43 pm
Thoughts on the qaulity of the virtual software?
https://my.matterport.com/show/?m=4HkaxSGZ2LY
Appraiser
at 7:08 pm
TD Economics sees GTA real estate prices ahead by +7.8% by the end of the year.
https://economics.td.com/ca-housing-update
Chris
at 7:45 pm
Don’t forget page 3:
“These forecasts are subject to an extremely high degree of uncertainty”