3 ms·

> the houses in Canada aren't being bought up by rich people, they are being bought by middle and upper-middle class Canadians. Sales don't happen in a vacuum.

> the houses in Canada aren't being bought up by rich people, they are being bought by middle and upper-middle class Canadians. Sales don't happen in a vacuum. The middle and upper-middle have to pay that much because second in line is willing to pay almost as much. Matthews could make an offer of $999,999 on every house for sale in Toronto. He may not get any of them in the end, but in doing so he forces you to pay at least $1,000,000 if you want one. After all, if you were the only interested party you could just throw a couple of bucks out there and eventually some seller will have to give in. Landowners will not hold a property only worth a couple of bucks in perpetuity. If nothing else, property taxes will eventually compel them to unload it. It's other interested buyers that push you to pay more. > "Tech started to show promise" so you're saying that people stopped by homes? Sure. Again, not a vacuum. To stick with the hypothetical for the sake of illustration, let's say Matthews was making such offers but now is enthralled by some AI startup in Montreal instead. By removing those $999,999 offers from the equation, that gives more room for you to come in at a lower price.

refurb 3y ago
> Sales don't happen in a vacuum. Sure, but your examples don't make any sense. Matthews isn't bidding $999,999 on every house. Nor will sellers agree to $2 just because there aren't other buyers. Property taxes are actually quite low in Toronto compared to other cities. $6k per year on a $1M house is pretty low carrying costs that will prevent you from taking a $999,998 loss. > To stick with the hypothetical for the sake of illustration, let's say Matthews was making such offers but now is enthralled by some AI startup in Montreal instead But the overlap between home buyers in Toronto and tech investors who do seed rounds in Silicon Valley is very small, especially for entry level homes.
- randomdata 3y ago
  > Nor will sellers agree to $2 just because there aren't other buyers. But that's what the house is worth. As the saying goes, something is only worth what someone will pay for it, and $2 is the only possible offer here, given the hypothetical scenario. Absolutely someone will give in to the $2 offer eventually. People pass on. The estate isn't going to leave the property just sitting there paying $6k per year doing nothing, when, again, it is only worth $2. It is not worth $1M in this hypothetical scenario. I don't know where you dreamed up that idea. Given the conditions of the hypothetical, there is literally only one buyer, and that buyer is only paying $2. It's a $2 house no matter how you slice it. Again, it's other buyers willing to pay more that push you to pay more. > But the overlap between home buyers in Toronto and tech investors who do seed rounds in Silicon Valley is very small, especially for entry level homes. A few things: 1. Even just one party losing interest in buying a house who has decided to reallocate the funds to a different investment can start to change the dynamic. This idea that every homebuyer needs to consider investing in something else is unfounded. 2. There are knock on effects when someone provides seed funding. Maybe they sold their stocks in Coca Cola to cover the seed, for example. That opens a vacuum that someone else needed to fill – can't sell Coca Cola stock to nobody. Eventually the money is going to be drawn away from housing given the change in allocation, even if through many layers of indirection. 3. The money also isn't leaving necessarily because of investment. There is also an outflow on the consumer side. Tech wasn't showing promise because nobody wanted anything to do with it... If you were prepared to spend every last dime you have on your house to buy into a market you otherwise couldn't afford, but then Jobs just announced that "one more thing", that shiny new iPhone is beyond your grasp. But you want it! It's so cool. So now what you are willing to spend on a house has been reduced, and when you make an offer it isn't going to come in as high. Multiply that out across many players and soon there is a lot less interest in keeping the prices high.

refurb 3y ago

> Sales don't happen in a vacuum. Sure, but your examples don't make any sense. Matthews isn't bidding $999,999 on every house. Nor will sellers agree to $2 just because there aren't other buyers. Property taxes are actually quite low in Toronto compared to other cities. $6k per year on a $1M house is pretty low carrying costs that will prevent you from taking a $999,998 loss. > To stick with the hypothetical for the sake of illustration, let's say Matthews was making such offers but now is enthralled by some AI startup in Montreal instead But the overlap between home buyers in Toronto and tech investors who do seed rounds in Silicon Valley is very small, especially for entry level homes.

randomdata 3y ago
> Nor will sellers agree to $2 just because there aren't other buyers. But that's what the house is worth. As the saying goes, something is only worth what someone will pay for it, and $2 is the only possible offer here, given the hypothetical scenario. Absolutely someone will give in to the $2 offer eventually. People pass on. The estate isn't going to leave the property just sitting there paying $6k per year doing nothing, when, again, it is only worth $2. It is not worth $1M in this hypothetical scenario. I don't know where you dreamed up that idea. Given the conditions of the hypothetical, there is literally only one buyer, and that buyer is only paying $2. It's a $2 house no matter how you slice it. Again, it's other buyers willing to pay more that push you to pay more. > But the overlap between home buyers in Toronto and tech investors who do seed rounds in Silicon Valley is very small, especially for entry level homes. A few things: 1. Even just one party losing interest in buying a house who has decided to reallocate the funds to a different investment can start to change the dynamic. This idea that every homebuyer needs to consider investing in something else is unfounded. 2. There are knock on effects when someone provides seed funding. Maybe they sold their stocks in Coca Cola to cover the seed, for example. That opens a vacuum that someone else needed to fill – can't sell Coca Cola stock to nobody. Eventually the money is going to be drawn away from housing given the change in allocation, even if through many layers of indirection. 3. The money also isn't leaving necessarily because of investment. There is also an outflow on the consumer side. Tech wasn't showing promise because nobody wanted anything to do with it... If you were prepared to spend every last dime you have on your house to buy into a market you otherwise couldn't afford, but then Jobs just announced that "one more thing", that shiny new iPhone is beyond your grasp. But you want it! It's so cool. So now what you are willing to spend on a house has been reduced, and when you make an offer it isn't going to come in as high. Multiply that out across many players and soon there is a lot less interest in keeping the prices high.