Juggling Dynamite

Last week brought the Canadian Real Estate Wealth Expo – learn how to become a millionaire event in Toronto.

All of the usual ridiculous, reckless characters and ideas that were prevalent at Tech investing conferences in 1999 and 2000, as well as commodity and precious metals shows in 2007-08.  Today we have real estate investment conferences on how to become a millionaire using “other people’s money” aka lots of DEBT!

For an excellent first hand account from one sober attendee.   Read:  I attended the top of the Canadian Housing Market so you didn’t have to:

The booths outside of the presentation hall were just as troublesome.  Plenty of “high double-digit monthly yields”, retire early with real estate, “everyone needs a place to live – buy apartments” type messages.  Almost all of these pitches were second lien lending.  Most offered yields in the 8 to 10% range.  The presentations all suggested that you can borrow money, if you don’t have it, at 4% and then buy these investments at 10% – easy money.

Always the same outrageous hype near market tops, followed by devastation, loss, lawsuits and forced selling near market bottoms.  If only people could learn to do the opposite of what the sales force-led-pack is doing.  Well actually, you can, but it requires self-discipline.

When people are using debt to maintain their lifestyle, they are also foregoing savings for the future. Spending on debt thus reduces funds for future spending and hence economic strength and stability for years to come.  A focus on short-term spending and lack of fiscal discipline has compound costs.

Scott Terrio, estate administrator at Cooper and Company, says Canadians are taking on too much mortgage debt. Here is a direct video link.

As you watch this report, remember that bank economists are required to temper their reports on financial risks, and understate downside forecasts, so as not to scare off customers from their bread and butter investment underwriting and sales side. But if you listen between the lines of the placid delivery here, there is some interesting info for the time capsule.

A new report from TD examines the level of speculative buyers in Toronto housing, and finds it might be worse than previously thought (or admitted?).  Their conclusion:  housing is divorced from fundamentals and some 24-40% overvalued at present.  Existing home sales per person are now at a higher level than the peak of the 1980’s price bubble. (Before values collapsed by 25 to 60% in many areas, sending the economy into recession and a host of realtors, lenders, speculators and households into years of financial and legal problems.)  Here is a direct video link.

Also see:  Investors now speculating on single family homes across the GTA.