The bubble finally deflating. not bursting.............

[WinnipegFan]

I have been following the market fairly closely as we are looking to buy in the next little while. However, with rent so appealing it is hard to justify. Seems the effect of the economy is finally being felt by the market. I have noticces about a 35,000-50,000 drop in the various houses we are watching. Predictions look like it may be worth waiting a little longer. Thoughts?

http://calgaryherald.com/business/lo...verage-in-2016

[Leeman4Gilmour]

As they say.....

[CroFlames]

I would just jump in if I were you. Prices are already favorable. I don't personally view a primary residence as an investment, and so I'd rather be paying my own mortgage rather than some landlord's mortgage. The sooner you start paying down your own mortgage, the better (imo, of course).

If you wait a year and you save let's say $20,000 due to price drops on a home, but you've spent $18,000 on rent during that year, what have you really gained? You lost equity at the very least.

[Northendzone]

To me you find a house that is in the price range you want to pay, buy it, and don't look back, otherwise, you will almost always find a "better" deal.

[OMG!WTF!]

Originally Posted by CroFlames

I would just jump in if I were you. Prices are already favorable. I don't personally view a primary residence as an investment, and so I'd rather be paying my own mortgage rather than some landlord's mortgage. The sooner you start paying down your own mortgage, the better (imo, of course).

If you wait a year and you save let's say $20,000 due to price drops on a home, but you've spent $18,000 on rent during that year, what have you really gained? You lost equity at the very least.

Would you rather pay your own mortgage, property tax, repair and maintenance costs, utilities, return on your down payment investment and potential loss of equity though? I've felt like I took a step back by renting for the last couple years but it's easily the best move I've made. People never consider the real cost of owning. Just the rent vs mortgage equation.

[troutman]

Location, location, location.

In some communities home values have stayed level.

Usually the market heats up in the Spring, but we are in unusual circumstances.

[CroFlames]

Originally Posted by OMG!WTF!

Would you rather pay your own mortgage, property tax, repair and maintenance costs, utilities, return on your down payment investment and potential loss of equity though? I've felt like I took a step back by renting for the last couple years but it's easily the best move I've made. People never consider the real cost of owning. Just the rent vs mortgage equation.

Everyone's situation is unique, for sure. I don't love paying my own maintenance, repair, tax, etc. However, I'm confident I will gain some equity over the years, or at the very least, my house won't depreciate to some absurd Detroit or Arizona recession level. I feel like if I'm renting, I'm guaranteed to not gain any equity whereas with owning, there is a chance at equity.

I've rented before and there are definitely advantages. But if OP has made up his mind to buy, I would just say don't delay.

[Fuzz]

In Calgary? I'd say now is the time. Prices rise in spring because people hate house shopping now. Anyone selling now is probably a little more motivated as well. If oil does stick around $50-60, I think we are going to see a big stabilization in Calgary, meaning you won't see much more for price drops.

[Titan]

Also, find a few properties you like and then offer what you would prefer to pay. You can impact the "market price" on your own.

[Frequitude]

Originally Posted by CroFlames

I would just jump in if I were you. Prices are already favorable. I don't personally view a primary residence as an investment, and so I'd rather be paying my own mortgage rather than some landlord's mortgage. The sooner you start paying down your own mortgage, the better (imo, of course).

If you wait a year and you save let's say $20,000 due to price drops on a home, but you've spent $18,000 on rent during that year, what have you really gained? You lost equity at the very least.

Not necessarily, because owning a house with a mortgage comes with interest and property taxes. From a cash flow perspective, those are essentially the same as rent...money out the door to someone else. And for the first number of years they make up the vast majority of your monthly payment.

Renting is competitive with owning so long as:
a) Your rent is in line with the interest plus taxes you'd pay by owning (i.e. don't rent beyond your means)
b) You don't fritter away the difference between your rent and a mortgage payment (i.e. instead of having a mortgage and building equity, you make sure you save that money that is the difference between a mortgage payment and a rent that isn't beyond your means)
c) The market doesn't run up and you miss out on capital gains.

[burn_this_city]

If you're putting down 20% at current interest rates more than half your payment goes to paying down the principal. There isn't enough of a divergence between rent and mortgage payments to be further ahead renting and saving the difference.

[rubecube]

Originally Posted by OMG!WTF!

Would you rather pay your own mortgage, property tax, repair and maintenance costs, utilities, return on your down payment investment and potential loss of equity though? I've felt like I took a step back by renting for the last couple years but it's easily the best move I've made. People never consider the real cost of owning. Just the rent vs mortgage equation.

Yeah, my girlfriend bought her condo a few years back and I think it's just starting to dawn on her now that it may not have been the great idea she thought it was. Her bathtub needs to be replaced, tiles need to be redone, kitchen cabinets replaced, etc. She's probably easily looking at $15k-$20k in renos and maintenance. So yeah, she may sell her unit for $10k-$20k above the purchase price when she finally moves out, but it's at best a break even transaction for her (probably a loss when including strata and property taxes).

Anyways, the number one reason I'm still hesitant to own is the flexibility renting gives me. I love the fact that I can pick-up and go at any moment.

[Hockeyguy15]

If I were a potential buyer I think what would affect my decision more would be availability over price. Maybe the prices will go down a bit more, but I think you will see less people selling at that point.

[Bill Bumface]

Originally Posted by CroFlames

I would just jump in if I were you. Prices are already favorable. I don't personally view a primary residence as an investment, and so I'd rather be paying my own mortgage rather than some landlord's mortgage. The sooner you start paying down your own mortgage, the better (imo, of course).

If you wait a year and you save let's say $20,000 due to price drops on a home, but you've spent $18,000 on rent during that year, what have you really gained? You lost equity at the very least.

Let's use your example, a house drops $20k by waiting a year.

Scenario 1: You buy the house now, and build a year's worth of equity via mortgage payments. That is ~$11,000 worth of equity in year 1 of a 25 year $400K mortgage. You also lost $20k in equity due to the price dropping.

Net equity for the year: -$9,000
Interest payments: ~$11,000

Scenario 2: You wait a year. You spend $18,000 on rent. The house drops by $20k

Rent payments: $18,000

So in scenario 1, you are out $20k, in scenario 2 you are out $18k. You also will save around $10,000 on the life of the loan.

Anyway you look at it, financially, it's worth it to wait a year for a $20k price drop.

[Frequitude]

Originally Posted by burn_this_city

If you're putting down 20% at current interest rates more than half your payment goes to paying down the principal. There isn't enough of a divergence between rent and mortgage payments to be further ahead renting and saving the difference.

I'm not saying you're ahead. I'm saying you're pretty much indifferent between the two.

And you're pretty close to the 50/50 point but just to clarify, down payment has nothing to do with how much of mortgage payment goes towards principal. That is entirely dependent on interest rate and amortization period.

25 years, 3%: 52% interest, 48% principal in first year
25 years, 4%: 62% interest, 38% principal in first year
25 years, 5%: 70% interest, 30% principal in first year

30 years, 3%: 59% interest, 41% principal in first year
30 years, 4%: 69% interest, 31% principal in first year
30 years, 5%: 77% interest, 23% principal in first year


Moral of the story, my point is that if you can rent for about 60%-70% of an affordable mortgage payment then you should absolutely considering kicking the buy decision down the road another year if you don't think the market's going up much. I like that range even though its higher than the 50%-60% interest component at current mortgage rates because 1) property taxes with owning are money out the door, and 2) low/zero risk of major maintenance costs with renting.

[burn_this_city]

Considering prices have been relatively sticky in the middle of the market (-3.8%YoY), I wouldn't bank on another 5% drop. I think the time to buy was a couple months ago when fear was highest and the mortgage rules hadn't changed. Now the risk is creeping bond yields forcing interests rates higher. Not sure we'll see another price drop unless oil and gas retreat 30% from today's prices. You could wait it out hoping for a better price, but watch your borrowing costs rise erasing some of your savings.

[Hockeyguy15]

Originally Posted by Bill Bumface

Let's use your example, a house drops $20k by waiting a year.

Scenario 1: You buy the house now, and build a year's worth of equity via mortgage payments. That is ~$11,000 worth of equity in year 1 of a 25 year $400K mortgage. You also lost $20k in equity due to the price dropping.

Net equity for the year: -$9,000
Interest payments: ~$11,000

Scenario 2: You wait a year. You spend $18,000 on rent. The house drops by $20k

Rent payments: $18,000

So in scenario 1, you are out $20k, in scenario 2 you are out $18k. You also will save around $10,000 on the life of the loan.

Anyway you look at it, financially, it's worth it to wait a year for a $20k price drop.

If you find a place you love now, and you are planning to stay long term it may not be worth it to wait the year. I would be willing to pay more for something I knew I could buy and loved, rather than waiting a year and hoping something was available.

If you are staying less than 5 years, I would say renting and waiting would be a better choice.

[Frequitude]

Originally Posted by rubecube

Yeah, my girlfriend bought her condo a few years back and I think it's just starting to dawn on her now that it may not have been the great idea she thought it was. Her bathtub needs to be replaced, tiles need to be redone, kitchen cabinets replaced, etc. She's probably easily looking at $15k-$20k in renos and maintenance. So yeah, she may sell her unit for $10k-$20k above the purchase price when she finally moves out, but it's at best a break even transaction for her (probably a loss when including strata and property taxes).

Anyways, the number one reason I'm still hesitant to own is the flexibility renting gives me. I love the fact that I can pick-up and go at any moment.

You're forgetting the biggest one...real estate agent and lawyer fees. The biggest lesson I learned from buying a freaking condo, other than getting caught up in the speculative frenzy of the late 2000's (let's not go there!), was that transaction costs on selling (agent + lawyer) ate up a lot of the principal I'd paid off. Probably didn't help that I borrowed at 35 years (again, let's not go there!).

If you're going to buy, you better make sure one of the two following thing happen to cover real estate agent fees:
1) You live in it long enough that the principal you've paid down doesn't just go to the real estate agent when you move.
2) The value of your house appreciates.

[Hockeyguy15]

Originally Posted by Frequitude

You're forgetting the biggest one...real estate agent and lawyer fees. The biggest lesson I learned from buying a freaking condo, other than getting caught up in the speculative frenzy of the late 2000's (let's not go there!), was that transaction costs on selling (agent + lawyer) ate up a lot of the principal I'd paid off. Probably didn't help that I borrowed at 35 years (again, let's not go there!).

If you're going to buy, you better make sure one of the two following thing happen to cover real estate agent fees:
1) You live in it long enough that the principal you've paid down doesn't just go to the real estate agent when you move.
2) The value of your house appreciates.

Don't forget that if you aren't doing 20% down those CMHC fees can add up pretty quick.

[troutman]

Originally Posted by Frequitude

You're forgetting the biggest one...real estate agent and lawyer fees.

The seller pays the realtor commissions. Lawyer fees are usually less than $1000 plus disbursements.