"Signs point to a severe housing correction in Canada"

(If you have time click on the comments section at the end of the article and skim through the first few top rated ones)

http://www.theglobeandmail.com/globe-investor/investment-ideas/experts-podium/signs-point-to-a-severe-housing-correction-in-canada/article1979229/

Okay, this article was truly funny. I've been staying out of the real estate market for a while now because the numbers just don't work. As an investment it's a real loser right now. You would be better off renting right now as opposed to buying. Why? Because they're both throwing money in a hole, just renting is a much shallower hole right now.

Based on the metrics I'm looking at in my specific situation, renting vs buying a house right now will have my portfolio $150,000 fatter over the term of a mortgage based upon current investment returns, inflation, mortgage rates and expected return rates on real estate. May not seem like much, but it's enough to keep me out of the real estate market, especially in Prince George. There are tons of good tools on the internet for evaluating this if you can't do the math yourself folks.

Obviously, this fellow from the states hasn't visited this area either and taken everything into account like crime, or escalating property taxes with little in the way of return, and in my opinion dwindling future prospects. There are places in the states right now where you can buy perfectly good homes for a few thousand dollars, but I wouldn't buy their either because I still have to work for the next 25 years and there are no prospects around these massive tracks of abandoned real estate. Might be a boon for a speculator one day, but that's not my game.

Ben, real estate is seriously overvalued right now. A correction is coming and when it does and there are a bunch of folks with mortgages larger than the market price of their shacks, then things are going to get interesting. That's what I'm waiting for...

Charles ..... the article is about Vancouver and Toronto. Those cities happen to be in Canada. But they are not Canada by themselves.

The situation is totally different in cities such as Ottawa, Winnipeg, Montreal and other cities in Quebec as well as the Maritimes. Also in most smaller communities such as Prince George which are not a commuter city of a larger urban agglomeration such as communities in the GVRD.

The statement that Canada has the highest price to rent ratio is based on those two cities. Each city in each country is different.

Think locally in this case, not globally.

"So what's the driving force?

Well a lot of new workers heading back to the forest industry, a number of major mines, and of course that pent up demand."

Give me a break!

Pent up demand? Now that's a knee slapper if I ever heard one. New workers heading back to the forest industry, well that's pretty funny too. I'm on the opposite side of the fence on this one. Real estate is grossly oversold in my opinion. There is lots of inventory out there and it's not moving. The forest industry is running at close to full bore but I doubt it is employing any more people than post 2008 and most have their houses already and have had for years, or won't be in the market for various reasons.

Now is not the time to buy. All good things come to those who wait. There will be a correction and you don't want to be on the other end of it. Interest rates are artificially low and housing prices artificially high at the moment. The teeter will totter at some point.

If people see the prices for houseing outside our area, will see our prices are one of the lowest in Canada. So with the economy picking up alot faster here (look at the unemploynment rate) will see this article is bang on with how the economy is heading at the present moment.

Good post Ben!
As much as realtors and real estate boards etc.deny it,prices may be telling us that we are very likely approaching critical mass in the real estate market.
Very few realtors are going to admit that.
Naturally some areas of B.C.are worse than others.
Vancouver comes to mind...that is a simply time bomb.
It defies all logic.
Personally,I think there is a bubble effect happening right across Canada,and has been for quite a while.
At some point soon it will indeed come to a head.
It always does,it's a question of when,not if.
Rising interest rates will lkely set it off.
That may not actually affect Prince George directly,but any downward trend in the market will have some effect on overall prices and sales.
And not just for real estate.
It is a damn good time to pay attention to the old "buyer beware" warning for a lot of things.
Another thing we do seem to be seeing is a stonewall in the stock market.
A lot of long time brokers and investors seem to think we have gotten to the peak in stock prices for many things,particualrly gold and oil,and other comodities in general.
If they are right,we can expect a general slowdown in everything,and again,this will really show up when interest rates begin to rise.
And rise they will...soon.
Once the money machine starts to roll,interest rates could rise very rapidly.
Debt load is everything,but it is usually the last thing far too many people pay attention to...until it is too late.
As an investor,"buyer beware" for a lot of things right now seems like damn good advice.
We would all do well to pay attention and do our homework before jumping.

Well good to know that people are willing to pay rent and pay down my investments in PG as in other cities in BC. With the average price of single family across Canada at 325K - Prince George (270K) is still affordable. As long as your not carrying big debt...(truck payments can be a problem here)a household income of 42K per year will buy you a home....HOW GREAT IS THAT!!! There will be no "Correction" here in PG - Get a grip - Or at least have a basic understanding of the economics as it relates to house prices in each region of Canada! Get ready for new economy....it will be taking place here!

Prince George will fare better than a lot of other areas,but we are not immune to any fallout.
It is times like these when I am glad I live in the north, but we still need to be realistic and cautious.

"With the average price of single family across Canada at 325K - Prince George (270K) is still affordable"

No doubt that PG is still affordable when compared to the average. That said, the thing that many of those "average" cities have that PG doesn't, is growth. PG's growth over the past couple decades has been stagnant. Truth be told, we've actually lost population from when we in the low 80,000 mark. Any job growth in PG in recent years has simply replaced jobs that were lost in the forestry and related industries. There have been virtually no net job increases in PG in years so as far as an increase in house prices go, there is no REAL factor to drive prices up. In fact, if you look at all of the vacant lots sitting empty, it should drive home the fact that there is also no real demand for new housing here other than the odd home. The housing starts confirm this.

So we have no demand for new homes, excess capacity in the form of vacant lots (so there is no supply constraint) and virtually no population growth. To me, that indicates that there is no real reason for prices to climb unless people become emotionally attached to this idea that we are going to "boom" and speculation drives up prices.

How long have we been hearing now that PG is on the verge of a boom? I think we're going on a decade now. What has happened? Oh that's right, NOTHING. The population continues to decrease and age, there has been no substantial private sector investment in the city in years and any economic activity that looks to be promising is all located in outlying areas. These developments may have a minor benefit to PG, but they won't be significant enough to cause house prices here to climb at a significant rate from where they are now.

People that think that the economy here is picking up should really venture outside of PG. Visit other cities and you'll actually see subdivisions being developed, you'll see new commercial buildings going up, you'll see schools being built, etc. To top it off, house prices in these areas are often on par with PG or even less! Those "average" house price figures are very impacted by the big cities but when you look at places with a similar population to PG, especially outside of BC, you'll find that we're not all that cheap.

The fact of the matter is that house prices go up when there is demand for housing. Until such time as our population grows (and for us that will require economic development and other changes to increase the attractiveness of our city), get used to the prices we have now or even lower prices. But hey, if people want to listen to what a real estate speculator somewhere in the US believes, go for it. Until such time as I drive around in PG and see foundations being poured in the various empty subdivisions, I'll trust my own knowledge of the area :)