Calgary Real Estate predictions?

[DoubleF]

I got talked down from 25% down to 20% + changed my payment terms from bi-weekly to bi-monthly this last December and the lender even paid the CMHC fee (or whatever insurance fee, broker said there's two options) by me agreeing to do it. I didn't mind the freeing of my cash flow so I agreed to it. Once I sell my other property (buyer in place dealing with idiotic paper work), I'm increasing the bi-monthly repayment amounts significantly.

Anyone else notice the paper work is crazier recently? My broker said that my first property (2012) was like half an inch of paper for requirements. This mortgage (2015) was over 2 inches of stuff.

[Bonded]

My biggest fear with housing, isn't oil waning and Calgary losing value. I am more concerned if interest rates return to 4-5%.

I think that would tank housing values. I wish I was old enough to buy in 04 hah.

[squiggs96]

Originally Posted by BrownDrake

This is a forum full of opinions, find yourself a bank manager or executive you really trust and ask him/her some questions.

I won't get into my personal experiences with who and where but it has also happened to me, I knew going in it would, and played out exactly like I expected. I put 60% down, when I wouldn't listen to my banker, they actually brought in a financial planner for me, spreadsheets an all showing how much more sense it made to go with 10% down and CMHC, invest my other 50% for 8% returns, while only paying 3.5% on my mortgage.

And I could really care less if you believe what I'm telling you.

How much less could you care? Would you say you are at 60% caring, but you could go down to 10% caring? If the rates were good enough, could you still care at 20%?

[polak]

Originally Posted by squiggs96

How much less could you care? Would you say you are at 60% caring, but you could go down to 10% caring? If the rates were good enough, could you still care at 20%?

If you only put down 10% of your caring you could care less while investing more of your care in more care-worthy investments with a higher return on care.

[OMG!WTF!]

Originally Posted by Bonded

My biggest fear with housing, isn't oil waning and Calgary losing value. I am more concerned if interest rates return to 4-5%.

I think that would tank housing values. I wish I was old enough to buy in 04 hah.

I think rates were around 4-5% in 2004. When I was your age, my first mortgage was 6.75% in 2001. But for sure we've gotten used to bigger houses and lower rates.

[Red]

You guys dramatize too much. Is mortgage even a debt?

Now I've done it

[BrownDrake]

Here is a Chronology of CMHC rules & mortgage data:

1954-1990- Somewhere along this time, 10% became minimum down payment.
1990- 5% was introduced as a trial run, officially accepted in 1999.
2001 – Genworth (GE Capital) enters the Canadian mortgage insurance market
2001 – CIBC offered below-prime mortgages.
Pre-2003 – CMHC: 5% down with price limit depending on area, 25 yr amortizations, no price limit if 10% or more down
Sep 2003 – CMHC: 5% down, 25 yr amortizations, removed all price ceiling limitations. Now any mortgage would be insured regardless of the cost.
Mar 2004 – CMHC: Flex-Down product allows 5% down to be borrowed and 1.5% closing costs to be borrowed (essentially zero down, but 95% insured)
Mar 2006 – AIG enters the Canadian mortgage insurance market
Mar 2006 – CMHC: 0% down, 30 yr amortizations (Genworth announces 35 yr amortizations)
Jun 2006 – CMHC: 0% down, 35 yr amortizations, interest only payments allowed for 10 years
Nov 2006 – CMHC: 0% down, 40 yr amortizations, interest only payments allowed for 10 years
Oct 2008 – CMHC: 5% down, 35 yr amortizations, investors need 5% down.
April 2010- CMHC did some minor tightening of their guidelines, investors need 20% down.
March 2011- CMHC only allows 30 yr amortizations, restrictions on pulling equity out
2012 - CMHC only allows 25 yr amortizations, insured mortgages limited to $1 million, home equity refinance drops from 85% to 80%.

The amount of credit expansion and loosening that occurred from 2003 to 2006 was crazy. Any wonder home prices almost doubled in 30 months?
Calgary SF Median (January 2005) +/-$240,000
Calgary SF Median (July 2007) +/-$440,000

[Bonded]

Originally Posted by OMG!WTF!

I think rates were around 4-5% in 2004. When I was your age, my first mortgage was 6.75% in 2001. But for sure we've gotten used to bigger houses and lower rates.

Yeah, if those interest rates return then Calgary real estate would lose 20-30% overnight because of the way mortgages are structured here.

If you could lock in 2.79% on a 25 year term, then not that big of a deal, but based on what I was approved for, if I went for the top limit, 5% interest rates would make the payment tough.

I think a large increase is unlikely because it would cause a pretty large asset devaluation but who knows.

I find that much more worrisome than the cooling of oil. I don't think Calgary loses 15-20% based on oil.

[Simanium]

Originally Posted by Bonded

My biggest fear with housing, isn't oil waning and Calgary losing value. I am more concerned if interest rates return to 4-5%.

I think that would tank housing values. I wish I was old enough to buy in 04 hah.

Realistically, the rates aren't returning to 4-5% anytime soon. The only way this would happen is if the economy, not just Canada, but really worldwide, erupted from this period of stagnation. I don't see that happening, I think low rates are the new normal. It would be too much of a shock to the country to raise rates without the economy responding and there really is no reason to expect that anytime soon.

[mrkajz44]

Yeah, the Bank of Canada is well aware that people have a ton of debt tied to the overnight rate, so if rates do start to come back up at some point, I'd suspect there were be big hintings at it well before hand and it would be done gradually. It's not just the mortgages, it's all the lines of credit that I think would really hurt people.

The only issue with this is that rates are so low, people think its a good idea to leverage to their eyeballs as the cost is so low. How do you fix that without raising rates and forcing a bunch of people into foreclosure and bankruptcy? I wonder how rates will play out over the next 5 or so years. I think something has to happen, but I'm not sure what.

[Bonded]

Originally Posted by mrkajz44

The only issue with this is that rates are so low, people think its a good idea to leverage to their eyeballs as the cost is so low. How do you fix that without raising rates and forcing a bunch of people into foreclosure and bankruptcy? I wonder how rates will play out over the next 5 or so years. I think something has to happen, but I'm not sure what.

Yeah, that is the problem. There is no good way out unless rates stay low forever. I am aiming to buy a good chunk below my max approval, but it is tempting to just max out and seems like a lot of people are doing it.

[kevman]

Originally Posted by BrownDrake

This is a forum full of opinions, find yourself a bank manager or executive you really trust and ask him/her some questions.

I won't get into my personal experiences with who and where but it has also happened to me, I knew going in it would, and played out exactly like I expected. I put 60% down, when I wouldn't listen to my banker, they actually brought in a financial planner for me, spreadsheets an all showing how much more sense it made to go with 10% down and CMHC, invest my other 50% for 8% returns, while only paying 3.5% on my mortgage.

And I could really care less if you believe what I'm telling you.

You sure showed them! Assuming a $500,000 house that 5% spread on your down payment over the last 5 years would have earned you almost $70,000. Subtract the $10,000 or whatever CMHC fees are and you're still up $60k. Please explain how you came out on top here...

Edit:

And yes, this is a forum full of opinions. In my opinion in this low rate environment you can do very well by maximizing your mortgage. That is of course if you actually save/invest the difference...

[BrownDrake]

Originally Posted by kevman

You sure showed them! Assuming a $500,000 house that 5% spread on your down payment over the last 5 years would have earned you almost $70,000. Subtract the $10,000 or whatever CMHC fees are and you're still up $60k. Please explain how you came out on top here...

Edit:

And yes, this is a forum full of opinions. In my opinion in this low rate environment you can do very well by maximizing your mortgage. That is of course if you actually save/invest the difference...

Thanks for pointing out that the math makes perfect sense. I wasn't questioning the math, it makes very good financial sense providing you're house doesn't lose value and your investments are liquid and actually make you a return. Some level of debt is healthy especially at low interest rates. Assuming the majority of people with a CMHC mortgage of say $300K actually has an additional $150K to $300K in cash or liquid investments outside of an RRSP's is probably not the case.

The point is why were they so concerned about getting me into CMHC and in 1999 they pushed you hard to avoid CMHC? Are you willing to admit its probably because the CMHC mortgage becomes a very sellable triple A security, the other mortgage is risk for the bank and has little value.

When you want to sell something and are encouraging debt - you don't think there is the slightest chance they have approved these types of mortgages to people that otherwise would not be "good risks" because they weren't concerned about them ever paying it back and the mortgage was sold shortly after the ink dried?

Why has a bank executive told me they are less stringent on CMHC approvals than borrowers with higher incomes and down payments that want to avoid CMHC?

In 2003 about 7% of Residential mortgages in Canada were securitized, today that number is over 40%.

Record low yields on traditional government bonds etc. and the lowering of interest rates is intended to encourage risk and debt, it also creates distortions in markets as the reach for yield by starved investors and pension funds creates demand for products that otherwise wouldn't be there (MBS, high yield debt - US oil companies).

It's different here, nothing to worry about, I get it

[Swift]

From the Wall Street Journal -

In Calgary the slowdown also has been felt by a wider range of homeowners. In Houston most of the pain so far is being felt among sellers of high-end homes priced at $500,000 and above—a sector that saw a 12% decrease in sales volume in the year ended in February.
Until recently, this was also true in Calgary. The slowdown had been more or less confined to high-end homes worth C$700,000 (US$534,800) and higher.
But now that trend is playing out in lower price ranges as well, especially in the C$500,000 to C$600,000 range, which includes the majority of the detached homes, according to Ann-Marie Lurie, chief economist with the Calgary Real Estate Board.

http://www.wsj.com/articles/calgary-...ust-1459876561

[OMG!WTF!]

Just a quick note....Discovery Real Estate is bankrupt. They "didn't react fast enough to the faltering economy".

[Kavvy]

Originally Posted by OMG!WTF!

Just a quick note....Discovery Real Estate is bankrupt. They "didn't react fast enough to the faltering economy".

The Calgary Herald comment section on the article sure had a lot of angry people implying the Herald wasn't telling the while truth about the firm.

[VladtheImpaler]

Originally Posted by Kavvy

The Calgary Herald comment section on the article sure had a lot of angry people implying the Herald wasn't telling the while truth about the firm.

The Herald is a realtor/developer whore rag.

[Johnny199r]

Originally Posted by VladtheImpaler

The Herald is a realtor/developer whore rag.

I enjoy the sponsored content regarding housing communities designed to look like regular columns.

[Kavvy]

In St. Andrews heights, there is currently a Bungalow listed for $905,000, which is a 15% drop from its Sept 2014 sale price.

Its interesting (and heart breaking) as this is a real measurable drop in a highly desirable community. Not simply a drop in the list price or something like that, but actual sold price to current list price.

Weird thing is, if houses like this hit the market in increased numbers, the average selling prices goes up. May has had the 2nd highest $1 million + homes sold ever, and we have something like -30% total sales from 2 years ago.

[d00little]

Originally Posted by Kavvy

Weird thing is, if houses like this hit the market in increased numbers, the average selling prices goes up. May has had the 2nd highest $1 million + homes sold ever, and we have something like -30% total sales from 2 years ago.

I've noticed that also. Total sales have fallen, but the percentage $1 million+ sales out of the total seem to have increased. Of course those $1 million+ homes are seeing price drops, but the overall average price increases.