Investorial

Big bubbles don’t always have to pop, big balloons don’t always have to burst. And as you watch one being blow up, there are always 2 camps of people eagerly awaiting the outcome. Is that next breath going to be “the one”, or will it keep going?

This past month, I have been eyeing various real estate headlines from a Canadian newspaper, The Globe & Mail. They hide their articles behind a wall of registration, so I won’t be able to link directly to the articles. But take a look at the headlines, what do you see?

• Bidding wars disappearing in Vancouver
• U.S. housing slump deepens, spreads
• Housing boom fizzles in Calgary
• White House lowers growth outlook amid housing slump

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These days, water-cooler discussions at work may sound something like “I’m thinking of buying/selling my home. Is the real-estate bubble going to pop? Is there even a bubble?” Hmmm.. let’s just say that some regions are experiencing a state of instability in their real-estate market for the recent time period. How’s that for being politically correct?

No matter whether you think there is a real-estate bubble or not, you will find someone forcing you their opinion about the topic in the media — on the evening news, in your newspaper, on internet blogs. Everybody’s worried about buying and selling real estate! With all those noises in your head, why not step back from all that “marketing” or “fear-mongering” and discuss the media’s role / impact during these “bubbles”? (more…)

Dr. Dolf De Roos (as he likes to be called) became famous for being a writer on Robert Kiyosaki’s Rich Dad advisor series. His specialty is real estate and he is the author behind the best seller Real Estate Riches.

But that book came out in 2001. Even though a newer edition was published in 2004. We have not heard much from Dolf since 2001. In fact, on John T. Reed’s revealing analysis of Dolf De Roos, John informed that Dolf was no longer associated with Rich Dad since February 2004. This assertion also shows why Ken McElroy has since replaced Dolf in Kiyosaki’s stable of advisors.

But where is Dr. De Roos nowadays? He has actually found a new alliance with (more…)

I’m stunned by what I’ve just read; all I can say is WOW!

Recently, the blogosophere has been on all cyclinders talking about buying vs. renting, and many calculator spreadsheets have also popped up. But my vote has to go to Julie Ali who is guest-blogging at Jim’s Blueprint for Financial Prosperity. Her writing is absolutely terrific in its depiction of the emotional issues of buying vs. renting.

[...] There is a rental cycle that is the diagrammatic opposite to the house buying cycle. When people are madly engaged in a love affair with the purchasing of their first, second or final upscale home, they turn their nose down at even the mere plebeian thought of dating a rental house. Even the sensible arrangement of renting for a few years in order to acquire a down payment for said house is refused. “Why should we make the landlord richer?” they sniff as they run to their local banking casino of choice and throw down their chips to lose a fortune on the turn of the mortgage interest wheel. [...]

Julie hit it right on the nail with that assessment. When you hear (more…)

My family and I originally hail from the south-east asian country of Singapore. So it’s not a stretch to say that I’m still partial to news from the region. I recently discovered an interesting blog that is all about investing and personal finance from the south-east asian perspective!

But talk about the ridiculous prices! If I were still living in Singapore, would this be what I have to look forward to? I cannot imagine paying $3000 per square foot for real estate. You’d have to pay $3 million for a house that is of a mere 1000 square footage!

On a side note, It’s a pity that the Business Times article mentioned has so many login features that you can’t see what the article was talking about. Some quotes from the Business Times article would have made the blog post better!

It has been a while since our last housing bubble update! For the people living in the Greater Toronto Area (GTA), you may want to file this under believe it or not, but I didn’t believe it until I read about this $45 million dollar home listed for sale on the Multiple Listing Service (MLS) in the papers this morning.

[...] in Oakville is not only the most opulent property ever offered for sale in Canada, it is the most visible symbol of a real estate market gone ballistic [...]

A quick search on mls.ca for the Oakville region yielded not one, but TWO houses for sale at $45M and one for sale at $21.9M. Here are the stats and pictures on both the $45M estates: (more…)

Continuing the bubble watch series on real estate, I just want to point out a recently published article by The Globe & Mail regarding the real-estate scene in the United States. The article does not single out any particular region but takes a national overview. The numbers mentioned in the article are significant and serve to remind everyone that housing prices are really getting out of hand! Considering the interest rate trends these days, it is becoming more than tempting to stay on the side-lines. Eventually, consumers will start thinking better of it. However, never underestimate the power of the American Dream - owning you own home!

Globe&Mail.com: ‘Fewer can buy a house’ by Roma Luciw

I live in the Greater Toronto Area (GTA) and am one of the believers of the existence of the GTA real estate bubble, and its eventual burst. The real estate bubble is unlike the stock market bubble because there is no central marketplace. Bubbles exist in different areas of North America with varying degrees of severity. Investorial will be monitoring the big picture of the real estate situation as well as the Canadian and GTA scene.

Most analysts agree that low historical interest rates have been the primary driving force for the real estate bubble. Lenders also have a lot of influence on the perceived affordability of consumers. Creative financing arrangements have been pushed through by financial lenders in the United States. Here in Canada, mortgage lenders have loosen their requirements so much that “No Money Down” mortgages have become a possibility for the first time in Canadian history.

A side effect is that new home owners are having less equity in their home, putting them in a dangerous position if and when the bubble bursts. Another side effect is the windfall that the CMHC, a crown corporation of the government, is experiencing because of the high demand. The CMHC is making a killing due to high volumes of mortgage insurance being sold.

To avoid buying mandatory mortgage insurance, a home owner must be able to represent home equity of at least 25%. Most new buyers are already stretching their purchases due to the high prices and often elect to use whatever money left towards furnishings and renovations rather than equity.

My contrarian streak means that I will be looking for opportunities when the current seller’s market turns into a buyer’s market. Vacancy rates are rising as more renters keep buying to fuel the last phase of the bubble. As interest rates continue to rise, the supply and demand relationship will change. Those buyers who are ‘under water’ due to depreciating prices and low equity will also have the added burdern of mortgage insurance to worry about! The moral, what you think you can afford may not really be what you should be affording!

Canadian Business: ‘Mortgage Insurance: Homebuyer Beware’ by Peter Shawn Taylor