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Originally Posted by tvp2003
Wasn't one of the major driving forces the massive influx of people into Calgary, many of whom had above-average incomes? This drove demand through the roof, and took prices with it (as supply went to record lows).
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Toronto (generally) receives many more total people than Calgary ever has in a single year. As soon as Calgary has a large enough home building industry (like they do now) to meet demand prices should moderate until that home building indsutry shrinks and/or demand accelerates again past their ability to provide homes.
EXAMPLE:
The Calgary Home Building Industry could easily IMO provide roughly 2500 new homes per month right now if needed. (Compared to the ~800/month from 5 years ago).
Last month about 400 homes were purchased in Calgary. At the height of summer in 2008 only 1400 homes were purchased.
Also note that many Calgarians own more than one house (most people I know do - which is scary that it is the norm not the exception) and there are at least 10,000 units (maybe even 20,000-30,000 once all these condo towers are finished and the 'hidden inventory' hits the market) already in Calgary ready to be purchased if the seller could find anywhere near their price.
And then on top of that note that Calgary has both a historical and national high in home ownership of about 71%. Usually 60%-64% of Calgarians own thier own home so there are less people than ever before who do not already own a home.
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Also, I think the whole "0 down, 40 year mortgage" thing is overstated -- isn't the percentage of people with these mortgages quite low? With mortgage rates at record lows, it's not like the subprime stuff in the US or Alberta in the 80's where people's mortgage payments go through the roof... I suppose if people start declaring backruptcy left and right, that's another issue, but I haven't heard of any big spikes in foreclosures (in Alberta or Canada for that matter)...
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1) I have read (In the Financial Post) that at the height of the boom 70% of first time Canadian buyers were using 40 year/0 down mortgages.
2) Among existing home buyers the total amount of equity withdrawn from homes is staggering and means that long time owners do not have the large percentages of equity (after the already ~20% drop) to offset the marginal (or outright negative) equity of first time buyers.
3) This will turn out EXACTLY like the subprime stuff and/or the 1980's, if not worse. Either major deflation is going to set in long term which will eat away at home prices for 10+ years OR inflaton will explode and interest rates will spike to well above 15%.
4) As for looking for forecloures and defaults in Canada as a sign of bad times, you are putting the cart before the horse -- they start to happen after the next few dominos fall and people start to really get stressed financially. Canada is 2'ish years behind the USA just like they always are....
Claeren.