I myself am of the opinion the investing within the inner city is always a good proposition as RE on the periphery of the city experiences the sharpest decline in case there is a correction. Commutes with gas prices the way they are today can only held provide a floor for inner city real estate. Again, if renting is the name of the game, there are always quite a few takers closer to the downtown core. Typically your renter’s profile may be a single working professional, a new entrant to the workforce, an out of towner etc. Families where both spouses are working tend to have larger disposable incomes and may rent the townhouse’s, single detached homes for a limited duration until they find the home that they want to settle into. They also bring greater financial wherewithal and possibly some equity from their previous sale(in case they owned).

The other thing which I wanted to highlight is gone are the days of $80 barrel for oil. The EIA is forecasting prices of $130 for some time to come with the possibility of it rising to $180 within a 3 year period. Personal transportation has just barely penertrated a small segement of the developing world and their energy consumption will continue to increase dramatically. North America cannot wean itself off oil any time in the near future and the other thing to look into is that oil is a huge component of manufacturing and not solely used as a transportation fuel. Calgary’s/Alberta’s economy will continue to flourish with some abatement in the rapid growth rate.

The other point I would like to mention is that some of my young engineer friends have stretched themselves pretty thin with some big mortgages. However, do I think they will default, absolutely not! I think getting into a house after foreclosure would be close to impossible and the people who have invested in RE as a primary goal of having a roof over there heads are not going to be taken in by these cyclical trends. They are in it for the long run and as long as their expectation is that price will increase over the course of 10-15 years, they will stay the course and not sell/forclose. Just my two cents.

Its starting to look like 1982 all over again, as much as I want prices to crash so I can get a cheap house, I can’t help but feel horrible for all those people that stretched themselves to get into a house only to lose everything after a sharp “correction” in prices.

cheers, Chauvinist.

If prices drop more than 5% off their highs, many who have bought in the last 2 years will be in negetive equitity positions. Unless there is a quick rebound, I would expect these people to walk away from their underwater mortgages in large numbers. The resulting glut of of properties on the market could lead to further depression of prices, a greater number of people in negetive equity positions, and a vicious cycle down. My only concern is that in Canada, the structure of the mortgage market is such that taxpayers will be left footing the bill.

Yeah, the mortgage arrears is going to start climbing to it’s cyclical averages at the least. I have been tracking it closely for awhile now, expecting it to start climbing pending record amounts of inventory and a peak in prices.

The poorest affordability conditions in a generation should lend itself to higher trending mortgage arrears pretty fast.

For holders of Canadian originated asset backed commercial paper – BEWARE!

Yeah, the biggest arrears curve is coming up soon. Just watch. 40 yr mortgages, 0 down, etc. Most are house poor already, The dollar amount for arrears will be going up.