[Claeren]

^ Higher incomes (and low unemployment) may (or rather will) help soften the landing i agree, but have little to do with long term housing prices.

Chicago, Dallas and Houstan - just as an example, all have after tax incomes that are quite high (often higher than here, because taxes are so low) yet have low average pricing. While cities like Hawaii, SanFran and NYC have high incomes and higher pricing. The difference is scarcity of land, not income.

Now that Calgary has re-developed the capacity in the development industry to provide tens of thousands of units, and obviously has no land restraints, there will be no upward pressure on pricing until that capacity to build dwindles (usually takes 10 years AFTER the market has fully softened) and growth picks up again. It has happened during EVERY cycle in the market. Inflation will do its work and prices will slowly drop for the next 10 years versus that inflation...

Putting it another way, housing prices in Calgary only spiked because of a lack of capacity to meet demand (< Like ALL commodities!). Now that there is excess supply there is no justification for high prices. Speculators exaggerated that spread between supply and demand to their benefit, and now we are left with a bubble that needs to be deflated 20%-30%.

(40 year/0 down mortgages helped extend the bubble last year because people who do not have time to reflect on supply/demand dynamics look at this housing not as a commodity but as a basic need, and thus stretch to buy it. That perpetuates the cycles further and falsely increases the demand for the commodity further, creating a positive feedback loop. Only once that loop is broken does the opposite feedback loop take hold, where lower prices discourage ALL buyers, further lowering prices and thus discouraging more buyers from buying until later, etc. Buyers who would have been there to buy some of that inventory are not only already home buyers, but are stranded home buyers upside down in their equity positions. 71% of Calgarians are home owners, which is about 5% higher than 'equilibrium' and an all time high. Seperately 20%-25% of Calgarians surveyed say they own at least 2 homes which means that there are more homes than potential home owners. Further, baby boomers in mass will be wanting to sell their oversized homes to fewer and fewer people that could ever afford to buy them at current prices, and the market can provide ~30,000 new units per year is need be. etc etc etc)


Property that reflects scarcity in Calgary will hold the most value (single family homes, urban inner city property, etc) while property that does not reflect its scarcity (suburban homes, suburban condos especially) will not - as they are easily replicated and therefore are not scarce.

Income has an affect, but is not a cause.





Claeren.