 We all know that Canada needs more housing. When demand outstrips supply, the market's invisible hand should encourage developers to fill the gap. But housing projects are failing left right and centre. Lenders are sending me and other liquid developers their portfolios of bust housing projects to pick over. They're often not worth buying though, because of bad pricing. Lenders and the projects' struggling owners don't comprehend how overvalued their 'assets' still are. This underlines a key premise of successful investing. You make a lot of your money on the way in by not overpaying. Buy low, sell high. Overpay and your chances of getting out whole are low when the business cycle shifts. Buying real estate was easy before and during the early part of the COVID pandemic when interest rates were at historical lows and money was effectively free. This was a dangerous time for amateur real estate investors and wanna be developers because they were led to believe their talent was responsible for their success, when it was really a cauldron of danger that was waiting to envelop them. The flames were interest rates. Once those rose we realized who was wearing Speedos and who was swimming naked. We learned who knows how to run a successful business, and who was building a zombie empire ready to fold when the slightest breeze blew, taking all the GP's trusting, innocent LP's down with them Back to Adam Smith and his Invisible HandWhy are so many large condo projects folding when demand is so high? I was going to answer this myself but then I found a video by the CBCs Andrew Cheng who did it more eloquently. Hats off to Andrew and About That, his daily CBC News Explainer videos that unpack complicated topics in a simple, strikingly visual manner. All credit for the video below belongs to the CBC. Please visit them at https://www.cbc.ca/
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