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Old 09-02-2016, 01:17 PM   #34
Slava
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Join Date: Dec 2006
Location: Calgary, Alberta
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Quote:
Originally Posted by Leondros View Post
I completely agree - that was not the point I was trying to make however. All I was trying to say is that an analysis on whether to pay off your mortgage has to look at the value of your home.

Unfortunately from a risk standpoint and what we are seeing in Calgary is people's portfolios largely consist of oil and gas companies as this is what this city knows. This results in a far too heavily weighted oil and gas portfolio coupled with Calgary home prices being directly tied to the health of the same industry. This is where people are finding themselves in big trouble as their job, investments and house were all attached to the same underlying commodity (no diversification whatsoever).
Well that lack of diversity is a hard one to argue against when times are good here. I've spent many meetings explaining to people that they ought to invest elsewhere because everything they have is tied to O&G. I joke that some people say they are diversified because they invest in oil and gas!

The problem is that when times are good there are more people than would care to admit that they want to "dance with the girl that brought them" along with a healthy dose of thinking they know a lot about the industry and are not going to fall victim to market declines.

All of that said though, that in and of itself is not a reason to not pay down the mortgage. While it is true that house prices could take a significant drop due to the oil issues we see today, it really hasn't materialised thus far. Obviously housing has declined to some extent, and in some price brackets the declines are steeper. But overall it doesn't look like there are exactly screaming deals for houses either. I'm not a real estate expert in any sense, but it looks like prices have dropped maybe 5-10% on average? That is more of a correction than a steep decline that is cause for concerns.
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