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Don’t take debt into retirement

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Here’s David Chilton on using home equity as a substitute for retirement savings:

There are too many risks associated with real estate — even in pricey markets like Vancouver — to justify making it the sole element of a retirement plan, the author and personal finance expert says.

“I don’t like it as a strategy at all because what happens is that anytime you have that kind of exponential rise in real estate it almost always ends up going the other way,” says Chilton. His latest book, The Wealthy Barber Returns, was released in September.

“It may not happen here because there’s so much foreign money coming in. But the potential for a significant pullback is still there.”

House price increases even in super-heated markets are likely to become more muted as the tailwind generated by rock-bottom interest rates eases, he says.

Did I just enter Bizzaro World? Aren’t ‘super heated’ markets often at a greater risk of a pullback?

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ReadyToPop

Investors rushed to buy Toronto condos in the good times, now there is a worry that they will rush for the exits as the economy weakens and they realize that profits are hard to come by in an overbuilt market.

Condo investors may head for exits

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fixie guy

@56 Troll Says: "Vancouver is like Detroit. That’s one of your best of all time."

Never wrote any such thing but that's a given from you.

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r_

@Troll:

Yep, it is hard to predict how long a phase of the cycle will last. The only thing that is clear is that we are in a period of over-valuation and at some point that will correct.

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Troll

@b5baxter:

In Vancouver 2007 2008 2009 2010 2011 right now there is plenty of evidence to suggest that we are at the point in the cycle where we should expect double digit declines.

There, fixed it.

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Troll

@fixie guy:

Not at all. Examples?

Vancouver is like Detroit. That's one of your best of all time.

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fixie guy

51 Troll Says: ".. and you consistently overstate downside. See how that works?"

Not at all. Examples?

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patriotz

@b5baxter:

"I think that most people here predicting a double digit decline (in the near term) would also predict a double digit increase (in the long term)."

Of course the nominal price of RE, and just about anything else, is going to go up in the long term. That has zero usefulness in deciding whether it is a good idea to buy RE or anything else at today's prices.

But if the nominal price ever drops below today's, or even fails to keep rising at a certain rate, someone buying today will end up behind someone buying at a future date.

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b5baxter

@Troll:

"Have you ever predicted a double digit increase? No."

Not speaking for "patriotz" here … but I think that most people here predicting a double digit decline (in the near term) would also predict a double digit increase (in the long term).

That is because real estate is cyclical. At some parts of the cycle there are double digit declines, and at some parts there are double digit increases.

To claim otherwise is to deny a couple hundred years of history.

In Vancouver right now there is plenty of evidence to suggest that we are at the point in the cycle where we should expect double digit declines.

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patriotz

@Troll:

"Have you ever predicted a double digit increase? No."

That's because there is no rational reason for prices to go up, and I have no idea what irrational people are going to do.

I can't speak for anyone else, but I don't predict specific price movements for specific periods for two reasons, the first being it can't be done, and the second being it doesn't matter because there is no economic penalty for waiting to buy or never buying.

All I'm concerned about is what purchase price makes sense and I've had plenty to say about that. As for the bull side, the only argument they can make for buying now is that prices are going to go up, so of course they try to back this up with predictions.

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Troll

@fixie guy:

Maybe this will help: they consistently understate downside.

and you consistently overstate downside. See how that works?

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Troll

@patriotz:

Have they ever predicted a double digit decline? No.

Have you ever predicted a double digit increase? No.

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fixie guy

44 Troll Says:"I love it, not matter what they predict and what the paper is printing they’re shilling. Prices going up? SHILLS! Prices flat? SHILLS! Prices going to drop? SHILLS!"

Maybe this will help: they consistently understate downside. Can you see how that still fits with your histrionics? That it took a 35% drop in sales and a single-year 11% drop in price to finally state 'bubble pop' is hardly an argument in your favour.

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patriotz

@Troll:

"Those dirty bastards claimed the bubble had popped!"

Everyone has to admit to what has already happened, What characterizes a shill is what they say is going to happen. Have they ever predicted a double digit decline? No.

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Not much of a name...

@Troll: Look up the definition of a shill. That will help. It doesn't matter what direction the market is heading, a shill is a shill.

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Troll

@Alum:

Please help this post from falling into foreclosure ….

vote up — vote up!

I think you're getting voted down because bears here are limerick fans, not rhyming couplet fans.

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Troll

Was this shilling back in 2009 too? Those dirty bastards claimed the bubble had popped!

http://www.cbc.ca/news/canada/british-columbia/st…

I'm no bank/RE apologist, but you bears need to gain some perspective.

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Troll

The RE industry and its shills always predict a decline of a few % when they think a bust may be imminent.

I love it, not matter what they predict and what the paper is printing they're shilling. Prices going up? SHILLS! Prices flat? SHILLS! Prices going to drop? SHILLS!

I hope Santa brings you bears lots of new tinfoil for Christmas.

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Alum

@Alum:

Please help this post from falling into foreclosure ….

vote up — vote up !

There is always a group of losers who miss the train.

This blog has been up by people with pain.

For long term, there is always real estate gain.

Next year the same story, again again again.

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Annonymous

Increasing American optimism?
http://theapplepeeled.com/

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Anonymous

@patriotz: "The RE industry and its shills always predict a decline of a few % when they think a bust may be imminent. Their motive is the hope that they don’t end up looking completely ridiculous."

There motive is also to try to prevent panic when prices do start to drop. By the time people realize it's not just a minor correction, it will be too late.

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Annonymous

Thumbs up for Declining consumer confidence? Optimistic crowd..

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fixie guy

24 DEFAULT NAME Says: "That along with cattle mutilations and crop circles."

Let's keep your pastimes out of this.

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cgh

Here’s a neat article on Eurozone debt, so it’s not completely offtopic for today:

“What really caused the Eurozone crisis?”

http://www.bbc.co.uk/news/business-16290598

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Anonymous

From Today's globe: Explore your inner renter.

http://www.theglobeandmail.com/globe-investor/per…

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patriotz

@DEFAULT NAMEe:
“I thought you guys said that the Sun was in the pockets of the RE industry? ”

The RE industry and its shills always predict a decline of a few % when they think a bust may be imminent. Their motive is the hope that they don’t end up looking completely ridiculous.

We’ve heard this before, it’s classic CYA.

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