Calgary After-Dinner RE Chat – “Renting is scoffed at. These bulls apparently do not believe that any significant economic or political events could impact Canadian RE values. Denial is powerful.”

“Was at a swank inner party last night (here in Calgary where I live) with 6 couples including my wife and I. At around 9:00pm when the table had been cleared and the many pre-dinner drinks and about 8 or 9 bottles of utterly intoxicating wine had been consumed, the after dinner whisky, scotch, and cocktials started to flow and the conversation around the table turned to real estate, economics, and politics.
The host couple (close personal friends of ours) and my wife and I were the only RE bears at a table full of RE bulls. Time for a little background, the host was a wealthy doctor who acquired his home on a golf course 11 years ago for about 1/3 of what it might be sold for today. He owes about $200K and will have the mortgage paid in full in 24 more months. If the property dropped back to what he paid for it they would not be materially financially impacted in any way, since they didn’t know that, or plan for, any appreciation due to a boom in RE values. They built the house to live in and pay off in a decade. It is one of a portfolio of many international properties that they own, amongst other things. The correct definition of homeowner could be applied here. We are renters here, even though we own a single piece of property in another continent that is paid for. Over the last 11 years we have saved a mid 6 figure sum in cash by renting, staying out of debt and living within our means.
These bulls apparently do not believe that any significant international economic or political events could impact Canadian RE values. Witness the election of a socialist to the presidency of France for example and the ramifications thereof. The Euro zone will create problems for all of us. As will the US and China.
It is also their entrenched belief that interest rates will never rise in Canada for a very, very, long time. Even though as other nations react and perhaps have to raise rates to attract capital in order to keep their financial ships afloat, poor little ole’ Canada will have no choice but to follow along or be left behind. Of course, we may just raise rates due to the bubble (that does not exist mind you) because we need to stop the madness and eventually one government will do so of their own accord when they come out of the ether.
Renting is scoffed at, merely because it does not support the last generations ingrained mental foundation of wealth creation, that all of your eggs must be in a piece of property or you are in a class lower than everyone else. When I was explaining that a renter can do just as well as, or IMHO better, than someone who had all of their net worth in a single piece of property, the guffaws could be heard round the table except at our end. Yet they could not, nor would they even try, to rebut our position with logic facts and reason, since perhaps they knew we held all the cards. Their arguments were entirely emotional in scope, and easily debunked. Just like any RE agents sales pitch.
At the end of the night I was looking at them and, to me anyways, it seemed that they were all dressed in black pants and shirts while wearing brand new white Nikes…… waiting for the RE comet to take them away (a la ‘Heaven’s Gate’). Denial is a powerful belief system.”

Carioca Canuck at VREAA 6 May 2012 2:43pm

8 responses to “Calgary After-Dinner RE Chat – “Renting is scoffed at. These bulls apparently do not believe that any significant economic or political events could impact Canadian RE values. Denial is powerful.”

  1. My parents live in the UK and have lived through multiple periods of increasing and decreasing housing prices. The last few years have seen steep declines. Even so my mother still espouses home ownership as the route to easy riches and distains renting as a “waste of money”. She got angry the last time I mentioned that I wasn’t considering buying claiming that it was irresponsible. No data or logical argument could convince her otherwise…it was like dealing with a cult member!

    • Most people discard the cult comparison as overly dramatic, but we think there is a serious argument for pointing out the many similarities between the ‘believers’ in any speculative mania and the members of cults.

    • Craig Sterling

      mmmmmm….. this is an interesting one and much as it pains me to say it, Mummy may be right. UK example – house prices appreciated 130% (ish) over 12 years. Yes, they have fallen 30% (ish) since 07, maybe as much as 45% in real terms – and are now flat.

      Play the same scenario in YVR – buy in 2000 and you’ve had a gazillion % increase in your capital. Say that gets battered by 50%, 60% real terms over the next five years – you’re still better off (over the MUCH longer term) buying than renting.

      Having said that, the real issue is the entry point in YVR, which is now frankly insane, especially for SFH. My mother raised me on the North Shore a little over 30 years ago and surprised me by saying “she wouldn’t live there now”

      My own values prevent me from passing on some of her comments about the people who have bought in to our old neighborhood, but let’s just say she felt some of them may not have acquired their funds entirely honestly.

  2. I often wonder how many now-renters who aspire for ownership will, once prices drop, decide that renting isn’t that bad after all.

    Hard to argue without getting into the specifics of one’s finances, but if you’re a real prick you make something up to do with diversified utility investments and US-based REIT holdings that makes you look a property investment genius.

    Or simply say you own enough property through your existing portfolio and don’t want to increase exposure more than you have already, especially in property that yields so poorly compared to your existing holdings. Full stop.

    Then drop the mic and go take a piss.

    • Once prices crash, there will be a skew of actual behaviour over currently held beliefs, in the direction of renting:
      – Many of those on the sidelines who thought they would buy at (modest) discounts, will sit on their hands and keep renting;
      – Some who own and were sure they’d ‘ride out’ any downturn will end up selling and, to the surprise of their past selves, rent.

      • well, havent seen those behaviour, but yours is insane! havent you admitted your failure to your wife and your children yet? do it sooner, or she might leave. you know women, they always get what they want!

  3. Fortunately, it’s often cheaper to buy in Calgary than rent but too many potential first time buyers seem to want new builds in close proximity to downtown. Lots of people who own SFH’s without mortgage still can’t afford their ideal inner-city home but at least there are affordable options unlike Vancouver.

  4. Grew up in Van., BC lived in Cal., Edm. and transferred to S’toon. 50 yrs. ago; great little city with a large, clean river right smack-dab in the middle; all fam. (“U-NO,” 4, then 9, and 5, so far) @home; one moved home after 11 yrs. in Van.; small bus. here; could’nt be happier if in “right mind!”
    O’yae, we pd. 12,500. for a brand new SFD 50 years ago and it’s become a 300,000+ invest. and a lake-cottage 30 yrs. ago invest. 20,000. now, 400,000+
    Today, it’s either kids or $ not both, “ordinarily speaking” just ask me or Kevin O’Leary.
    Bottom line, “do what ever makes you happy; or even satisfied!”
    There is “No Luck” out there, “only hard work,” don’t complain, get to work!
    All the best from bigalbuffalo.

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