All Forum Posts by: Clayton Gray

'"Home prices have risen ahead of economic fundamentals such as personal disposable income and population growth, resulting in overvaluation in many Canadian housing markets," the CMHC said.'

this is the first time the agency has issued this status nationwide however:

'While waving the red flag about overvaluation, the agency was quick to stress that doesn't necessarily mean that prices are bound to fall, quickly or steeply.'

https://www.google.ca/amp/www.cbc.ca/amp/1.3822175...

How are Canadian RE investors feeling about this? media hype? Too optimistic? somewhere in between? 

Do we have a shopping spree on the horizon? 

canada federal government announced some new rules yesterday meant to "cool off" the market. What does everyone think of this? Good? Bad?  Ugly?  Indifferent? 

http://www.theglobeandmail.com/real-estate/four-ma...

@dan mays . I attended a REI club meetup in Toronto this month where there was an inspector speaking about getting your secondary site legalized, your basement in this case. Let me know if that's of interest to you. I think he's based in Scarborough but works all over the golden horseshoe.

Also I'm in for a mastermind/accountability group. Keep us posted! 

http://www.cbc.ca/beta/news/canada/toronto/rental-...

Interesting how they only have quotes from tenant's rights groups. CBC bias maybe? 

What do all you Canada market mavens think about this? 

@Chris Fortner  The data seems to be saying boomtown and get used to it.

@Samuel Sedore Why do you say that Cambridge is only now entering the boom? 

@Claude Boiron agreed. I suppose it was a bit simplistic to call it a book about 'timing the market', to be clear this book is not advocating speculation, but very much like you are saying, is about doing the research on the market fundamentals and continuing to monitor them because they can change down the road for better or worse.

@Luc Boiron Yes, I didn't originally mention that each phase is delineated into a beginning, middle and end and the strategy differs widely depending on which stage the phase is at. I'm still pretty new to this so going to hold off on my own predictions and just refer to the book. 

In each stage of the boom cycle, patience is emphasized, particularly when you get into at or above market value (so far pretty common sense), buy and holds become less recommended as the progression continues and flips need to be very well oiled later in the game to move them out quick. Stress testing the portfolio is especially important when buying in the boom and planning for the long term cash flow. One of the case studies talks about an investor who liquidated his portfolio down to 40% LTV towards the end of the boom.

Also important to note I think is that values can continue rising in the beginning of the slump, where things like rents, and GDP are coming down while active listings are rising. Time to put your swimsuit on before the tide goes out ;)

Key drivers that tend to be the first indicators are a peak in affordability (RBC affordability index is the source used) 1st time home buyers hitting a trough as they are priced out of the market, while vacancy rates trough and begin to rise.

@Samuel Sedore have you put any of the analysis to work in your market? Interesting to see where Kitchener-Waterloo are doing.

Specific statistics are year-over-year percentage changes in most cases which creates a nice line chart indicating the direction each driver has been moving and how fast.

Just had a read of this book written by REIN (Real Estate Investor’s Network) creator Don R Campbell, as well as Kieran Trass an expert of real estate cycles and Greg Head and Christine Ruptash of Strategic Real Estate Solutions. Thought I would share a few nuggets that I’ve gleaned…

The central premise of the book is that every real estate market is cyclical and follows a predictable sequence in 3 distinct phases: boom (rapid appreciation, mania), slump (lower prices/difficult financing) and recovery (transition); all of which have their own qualifications as far as appreciation, vacancy, market confidence and so on. It goes on to say that, if an investor has the knowledge of this cycle and is able to discern where one’s particular market sits on the “Real Estate Cycle Clock” (ie which phase) they can make more successful investment decisions thus earning the moniker “Strategic RE Investor”. In layman’s parlance one could say it is a book about timing the market.

It follows the Trass Methodology developed by the author of the same name which basically states that the cycle is driven by 16 specific macro-economic indicators (key drivers) and by monitoring the ongoing trends in conjunction with one another, one can successfully predict the markets future movements. Some key drivers are net migration, GDP, employment rates and RE affordability indices. These are not to be confused with short term market influencers that, while they do have effect, they don’t necessarily sway the course of the cycle in the long term, some examples of market influencers are: interest rates, foreign investment and legislative amendments.

Following this are two case studies of historic examples of cycle transitions in Canada, Toronto '89 Boom-Slump and Calgary '97 Slump-Recovery-Boom in which they demonstrate the key drivers collectively moving in relation to average MLS price at the time.

I’ve been working to compile the data in my home market (Toronto), it’s a little tricky to find exactly the info I need and one should be proficient with excel to get the graphs that are shown in the books but It’s a compelling methodology.

Attached is the key drivers scorecard which has the list of the 16 drivers and their expected movements year over year in each phase.

Anyways, hope that is interesting for some of you, would love to hear your thoughts!

What are your methods for analyzing markets? Where are your favorite sources for gathering data? 

yep same for me.  I was actually amazed that my order showed up within days (to Toronto). I thought i was being served a court order!