Monthly Market Update

[Travis Munroe]

Originally Posted by nfotiu

Well, to be fair, if he had bought a $400,000 house, he would have likely spent pretty close to $15,000 in property tax, interest and repairs.

I came across the way I did due to other posts in this section which ruffled the feathers of both myself and some moderators.
As for the 15k in property tax, interest and repairs, it seems high to me... a couple thousand in property taxes - repairs should be at a minimum less than a year in assuming you had a inspection done and adjusted for required repairs. Interest I can understand depending on how much is put down but it is interest he will pay at whatever point he buys. If prices dip 30k on that 400k property, the interest saved on that amount is minimal.

[nfotiu]

Originally Posted by Realtor 1

I came across the way I did due to other posts in this section which ruffled the feathers of both myself and some moderators.
As for the 15k in property tax, interest and repairs, it seems high to me... a couple thousand in property taxes - repairs should be at a minimum less than a year in assuming you had a inspection done and adjusted for required repairs. Interest I can understand depending on how much is put down but it is interest he will pay at whatever point he buys. If prices dip 30k on that 400k property, the interest saved on that amount is minimal.

My point was just that spending money on rent vs spending money on sunk costs towards a house are pretty much a wash. So if house prices are stable for a year, he isn't really losing or gaining anything either way.

[Travis Munroe]

spending money on rent vs spending money on a mortgage is a wash?

25 years or less from now would disagree

[nfotiu]

Originally Posted by Realtor 1

spending money on rent vs spending money on a mortgage is a wash?

25 years or less from now would disagree

If your rent is less than (interest+opportunity cost of any down payment or built up equity+property taxes+HOA+maintenance and repairs) and house values stayed flat for 25 years, there would be no financial benefit of owning vs renting.

[polak]

Originally Posted by nfotiu

If your rent is less than (interest+opportunity cost of any down payment or built up equity+property taxes+HOA+maintenance and repairs) and house values stayed flat for 25 years, there would be no financial benefit of owning vs renting.

Rent is not cheaper than a mortgage payment right now though. They're still floating around the same. It's actually still cheaper to buy in my area. My mortgage+condo fee+tax for my 2 bed 2 bath would get you a similarly appointed 1 bed 1 bath. At least when I was making the choice to rent or buy a few months ago.

[nfotiu]

Originally Posted by polak

Rent is not cheaper than a mortgage payment right now though. They're still floating around the same. It's actually still cheaper to buy in my area. My mortgage+condo fee+tax for my 2 bed 2 bath would get you a similarly appointed 1 bed 1 bath. At least when I was making the choice to rent or buy a few months ago.

I have no doubt that there are a lot of circumstances where it can be better to own than rent. I just was taking a little bit of exception to Realtor 1 stating he blew $15,000 in rent while not taking into account that sunk costs associated with owning a $400,000 house which probably be right around that $15,000 mark. Maybe it would have been a $1000-$2000 net advantage over renting, maybe renting would have been a similar advantage, but it is in no way accurate to imply that it cost him $15,000.

[CaramonLS]

So I'm looking to buy right now in the SE (Think Douglasdale/Diamond cove), not deep SE. probably around 400-550ish.

Should I wait for a while or should I try to lowball a few places (like at -10% or something)?

My wife and I are in no rush and have plenty of time.

[GullFoss]

Im finding owning to be slightly cheaper than renting. Rent would be $1450 per month and im paying $1200 to own = interest on mortgage (650), lawyer fees with real estate and mortgage at (30), property taxes (100), condo fees (320) and upkeep, renos, and maintainence ($100).

But as you move up the ladder on the value scale i think renting might be cheaper if you assume no price appreciation. But thats tough to do...because even with house price inflation of 1% per year, you should come out ahead on owning

[pseudoreality]

Originally Posted by GullFoss

Im finding owning to be slightly cheaper than renting. Rent would be $1450 per month and im paying $1200 to own = interest on mortgage (650), lawyer fees with real estate and mortgage at (30), property taxes (100), condo fees (320) and upkeep, renos, and maintainence ($100).

But as you move up the ladder on the value scale i think renting might be cheaper if you assume no price appreciation. But thats tough to do...because even with house price inflation of 1% per year, you should come out ahead on owning

What about the lost opportunity of having that capital tied up in real estate versus a diversified portfolio? That has to be part of the calculation. Well, that and risk of having it in one asset.

[GullFoss]

Originally Posted by pseudoreality

What about the lost opportunity of having that capital tied up in real estate versus a diversified portfolio? That has to be part of the calculation. Well, that and risk of having it in one asset.

From a pure asset perspective, youre right. But if you take a broader view, id suggest the answer is a bit more nuance because you have to live somewhere, which is a liability. So in a way, owning a home is matching an asset (home) with a liabilty (need for shelter)

If you have strong roots to the city, then youre going to be exposed to the calgary real estate market for much of your future. If you own a home, your exposed via rising and falling home prices. If you rent, youre exposed via rising and falling rents for the rest of your life.

So either way you are exposed to the same risk, but renters and owners are on the other side of the table from each other. If you own, you get upside when the city does well. If you rent, you get upside when the city does poorly.

Given that due to rising population, positive inflation, and rising income levels, real estate prices are biased upwards over the long run, youre probably better off owning if youre going to living in the property a long time.

All that said, i think that view on home prices has become somewhat #######ized. Your home will depreciate over time (esp the finishings), while the land value increases. So all those building $1m+ homes might do a lot worse from a return perwpective than those building more modest homes.

But for a lot of people that is understood. Their home is also a consumption good, and owning does give you customization to consume exactly what you want while renting does not. And when youre making good money like many in this city, perhaps that is something - like a nice car, clothes, or vacations - you're willing to pay for.

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[Travis Munroe]

bump for update

[stampsx2]

With crude as low it is the real estate market seams to be hanging in there. No 20% drops in home values or anything.

[polak]

Originally Posted by stampsx2

With crude as low it is the real estate market seams to be hanging in there. No 20% drops in home values or anything.

Not yet. Net migration out of the province seems unavoidable if oil activity stays this low though. It's only a matter of time.

(and I'm saying this as someone who recently bought )

[darklord700]

Originally Posted by stampsx2

With crude as low it is the real estate market seams to be hanging in there. No 20% drops in home values or anything.

From my mental note I took visually, asking prices are going up comparing to Mar or Apr this year. Not sure about the actual sold prices thought.

[darklord700]

http://calgaryherald.com/business/lo..._lsa=51d8-5e0e

"Repeat home sale prices in Calgary surge in August"

[Travis Munroe]

You would never know there is a recession in the under 500k market.
It is slower in the 500-700 range but not bad.
The 700+ is where you can feel a recession!

[ranchlandsselling]

Originally Posted by Realtor 1

You would never know there is a recession in the under 500k market.
It is slower in the 500-700 range but not bad.
The 700+ is where you can feel a recession!

Which is how it should be. Assuming the housing market makes a large correction it would start in that level. The higher the pricing level the higher the amount people are likely to be leveraged. Lose your $50,000 job and own a $300,000 - $400,000 house you can try to make ends meet. Lose your $150,000 job and your $900,000 house is that much harder to maintain, $3,000 mortgage payment, $450 tax payment and all other payments are considerably larger than the person who could have initially seem more levered (LTV, DSC).

So, as no one is buying in that market the prices either come down or the layoffs stop. Once that level starts to come down it alters relative perception of the under $500 market. That level in Calgary will remain strong (relative) but as time goes on it's the house that is in that market that will change. There just needs to be capitulation at the higher end because really the residential real estate market is basically a game of relativity since financial metrics like property income, vacancy rates, cap rates, etc don't come into play.

[darklord700]

I think the 700+ market is the luxury market. People tend to upgrade form the 500K market to 700K+ market. But in this economy, potential upgraders will just stay put in their 500K house instead of upgrading.

[ranchlandsselling]

Originally Posted by darklord700

I think the 700+ market is the luxury market. People tend to upgrade form the 500K market to 700K+ market. But in this economy, potential upgraders will just stay put in their 500K house instead of upgrading.

So (again assuming) what happens as things get worse or stagnate (which still means getting worse) to all these $700,000+ houses that aren't moving? That aren't being sold or even toured. How do people that are short money, negative cash flow, etc. sell these houses that currently people aren't willing to buy when houses in sub $500k range are still selling quite well?

[darklord700]

Originally Posted by ranchlandsselling

That aren't being sold or even toured. How do people that are short money, negative cash flow, etc. sell these houses that currently people aren't willing to buy when houses in sub $500k range are still selling quite well?

There're still people upgrading from 500K to 700K just fewer than normal. Price reduction is the means to sell so a 800K house will sell for 750K or perhaps even lower if the seller is desperate enough. This one house in my area was originally listed in Jan this year for 930K and the last listing price was $789K in June or July this year and got sold.

I've seen a few houses originally listed in the 900K+ range and sold with the last listing price $100K or so lower than that.