Calgary Real Estate predictions?

[Travis Munroe]

I am very busy right now. Consumer confidence seems to be very high. Read a recent article in the hearld stating Alberta to lead Canada in real gdp.
Then again, this buzz always gets going around this time so its tough to really determine whats going on.

[chemgear]

^ nice, good to hear that your good service = better business for you.

Mike F's website is showing sales finally going above the decade's worst sales numbers in 2010. Still well below 2009 but finally a tad better than 2010.

Some other good articles he's linked on his website:

http://www.theglobeandmail.com/globe...rticle2046909/

Mr. Baker believes it might have something to do with the combination of low interest rates and Canadians’ tendency to take out mortgages with terms of five years or less, unlike the 30 years that is normal in the U.S.

“My theory is that home prices in places like Canada are acting like bonds,” he says. Just as bond prices shoot up when interest rates head down, so Canadian home prices have rocketed on the back of low mortgage rates, because our shorter-term mortgages make us that more interest-rate sensitive than Americans.

The corollary, of course, is that there will be big losses when mortgage rates inevitably head upward. “I would be wary in markets like Canada. In fact, I would be very, very wary,” says the Man Who Called the Last Two Bubbles.


http://www.mortgagebrokernews.ca/new...lowdown/106813

“We’ve seen growth in refinances, but there’s no compensation for the number of originations,” Lester Shore, VP of Optimum, CWB, told MortgageBrokerNews.ca. “I don’t know if the new mortgage rule changes will have a permanent impact, but their effect has been significant this spring. For the second half of the year we are expecting a 10-per cent, year-over-year drop in originations, where the reduction in maximum amortization from 35 to 30 years is having a significant impact on the number of people qualifying.”

Last month, another broker channel lender blamed those federal changes for as much as a 15-per cent dip in business, possibly reflecting the loss of clients to the alternative lending market.

[bizaro86]

Originally Posted by chemgear

Last month, another broker channel lender blamed those federal changes for as much as a 15-per cent dip in business, possibly reflecting the loss of clients to the alternative lending market.

What alternatives to the broker channel are there? Once you're past the chartered banks and lenders that work through brokers, what's left?

I guess the capital direct/Aaron Acceptance types, but wouldn't the vast majority of people be better off with a smaller mortgage at a lower rate than getting a bit more money and paying the vig??

[chemgear]

Originally Posted by bizaro86

What alternatives to the broker channel are there? Once you're past the chartered banks and lenders that work through brokers, what's left?

I guess the capital direct/Aaron Acceptance types, but wouldn't the vast majority of people be better off with a smaller mortgage at a lower rate than getting a bit more money and paying the vig??

^ I'm afraid I have no idea, perhaps more knowledgeable people can help?

On a side note, is it Aaron Acceptance that has the really annoying radio commercial about the married couple that needs to consolidate all their debt and ". . . maybe, just maybe, there will be enough left over for a beach vacation!"

Because my God, if you need to refinance/consolidate your debt load - you really should spend more money to fly out of the country for a vacation to relieve your stress about having so much debt.

[Tron_fdc]

Originally Posted by chemgear

^ I'm afraid I have no idea, perhaps more knowledgeable people can help?

On a side note, is it Aaron Acceptance that has the really annoying radio commercial about the married couple that needs to consolidate all their debt and ". . . maybe, just maybe, there will be enough left over for a beach vacation!"

Because my God, if you need to refinance/consolidate your debt load - you really should spend more money to fly out of the country for a vacation to relieve your stress about having so much debt.

My banker fed me the same line when I bought my rental in 2005.

"What you should do, is take out this HELOC, and all the money you pay off over the year you can use towards a vacation! It doesn't matter, because housing prices will never go down, and it's like hitting the lottery every year!"

If only that were true......

[fundmark19]

What its not! What am I going to do with this new quad and truck and swimming pool I got with my heloc

[chemgear]

Another interesting sidebar article:

http://www.theglobeandmail.com/life/...rticle2048860/

When it comes to young adults aged 18 to 27, the more credit card and university loan debt they carry, the more they feel in control of their lives, and their self-esteem rises with their debt level.

“We thought educational debt might be seen as a positive because it is an investment in their future, while credit card debt could be viewed more negatively,” Dwyer said.

“Surprisingly, though, we found that both kinds of debt had positive effects for young people. It didn’t matter the type of debt, it increased their self-esteem and sense of mastery.”

[Bill Bumface]

That is so odd. Every time I have to put something on my line of credit I become extremely anxious until it's back at zero.

[Slava]

Originally Posted by fotze

Can the financial advisor types tell us the types of commissions that were paid for helocs, manulife one type stuff. Those sure got sold hard.

Manulife One doesn't pay advisors that much actually. In order to make a kiving selling Manulife One alone a guy would have to do an incredible amount of business...at least IMO. Its a bank account after-all, so the commissions are not enormous. It's sold pretty hard by Manulife but I attribute that to the fact that they are competing against the big banks and need to generate interest in the product. Some advisors sell the product and others want nothing to do with it....just depends on the clientele and how the advisors use it.

[bizaro86]

Originally Posted by Slava

Manulife One doesn't pay advisors that much actually. In order to make a kiving selling Manulife One alone a guy would have to do an incredible amount of business...at least IMO. Its a bank account after-all, so the commissions are not enormous. It's sold pretty hard by Manulife but I attribute that to the fact that they are competing against the big banks and need to generate interest in the product. Some advisors sell the product and others want nothing to do with it....just depends on the clientele and how the advisors use it.

I'm surprised the commissions are lower, because it's more like a mortgage than a bank account. Manulife makes money on the interest rate differential, and it must be decent, because their current variable rate is 3.5%. Comparing that to the 2.2% I just got on a variable rate mortgage, there is definitely some profit margin in there for somebody. If it's not going to the advisors who sell the product, then it must be going to Manulife.

*** http://www2.manulifeone.ca/about-my-.../todays-rates/ (source)

[Finner]

I know branch staff (at least for one of the major banks) make no commission, they make salary. Of course they have sales goals but compensation is entirely salary.

[Slava]

Originally Posted by bizaro86

I'm surprised the commissions are lower, because it's more like a mortgage than a bank account. Manulife makes money on the interest rate differential, and it must be decent, because their current variable rate is 3.5%. Comparing that to the 2.2% I just got on a variable rate mortgage, there is definitely some profit margin in there for somebody. If it's not going to the advisors who sell the product, then it must be going to Manulife.

*** http://www2.manulifeone.ca/about-my-.../todays-rates/ (source)

Well to be honest I don't know how much a mortgage broker makes on a mortgage? I just know that as an advisor my primary source of income is not through Manulife One...then again I don't recommend it for every client. I have some clients who have never heard about this from me because I know their financial situation and habits and I just think it would be a mistake for them and they could get into more trouble than its worth.

Manulife clearly makes a few bucks off these plans, as does any financial institution lending money. Part of that though is that they are taking the risk by lending the funds in the first place....according to some people in this thread its a huge risk because the properties that they are lending against have been due to see their values fall off a cliff anytime over the past two-three years!

[Bill Bumface]

So for the real estate bears out there, what are the odds in your opinions of house prices holding for another year? I've got a rental I want to dump, but the mortgage is up in September of 2012 and I'd like to make it until then before I get rid of it. I'm wondering if I'll forever hate myself by waiting. Obviously, if anyone actually knew the answer to this, they'd be rich, but I'd still like to see what people are thinking these days.

[Cowboy89]

Originally Posted by hulkrogan

So for the real estate bears out there, what are the odds in your opinions of house prices holding for another year? I've got a rental I want to dump, but the mortgage is up in September of 2012 and I'd like to make it until then before I get rid of it. I'm wondering if I'll forever hate myself by waiting. Obviously, if anyone actually knew the answer to this, they'd be rich, but I'd still like to see what people are thinking these days.

From the sounds of it you seem to have doubts about prices holding up long term and are looking for reasons why a decline might be delayed. If I were you and were satisfied with the paper gains on your property as it stands today I would sell and redeploy those funds away from Real Estate (EDIT: Corrected, If all you do is buy a new property), then you're just as exposed to a potential RE slide as before the sale). A good way to emotionally justify whether it's time to sell would be to think of yourself on the buying end of your property. Would you re-buy your property again at the price you're looking to sell it for? If not then it might suggest a value differential between the market and intrinsic value and thus 'Greater Fool' theory applies and you should get out while you can.

[bizaro86]

Originally Posted by Slava

Well to be honest I don't know how much a mortgage broker makes on a mortgage? I just know that as an advisor my primary source of income is not through Manulife One...then again I don't recommend it for every client. I have some clients who have never heard about this from me because I know their financial situation and habits and I just think it would be a mistake for them and they could get into more trouble than its worth.

Manulife clearly makes a few bucks off these plans, as does any financial institution lending money. Part of that though is that they are taking the risk by lending the funds in the first place....according to some people in this thread its a huge risk because the properties that they are lending against have been due to see their values fall off a cliff anytime over the past two-three years!

It stands to reason that if people selling mortgages through mortgage brokers can make money at variable=2.2%, Manulife has some $$ to play with if they're lending money the same way at 3.5%. The risk is the same, but they're charging way more.

My guess on mortgage broker compensation is in the 1-2 months payment range, although I'm really not sure. I'm basing that off incentives I've seen where mortgage brokers have offered ~$400 in legal fees paid for your business, so it stands to reason they're getting more than that.

[bizaro86]

Originally Posted by Cowboy89

If I were you and were satisfied with the paper gains on your property as it stands today I would sell and redeploy those funds away from Real Estate (If all you do is pay down mortgages on other properties or buy a new property, then you're just as exposed to a potential RE slide as before the sale).

The first part isn't true. If he owned 4 properties worth 250k before, each with 200k in debt, he had 1,000,000 of real estate with 800k in debt. If he sold one, and took the 50k to do mortgage paydown, now he has 3 properties worth 750k and 500k in debt.

So a 10% decrease would cost him 75k in equity instead of 100k in equity. Also, it would take a 33% drop in prices to get to a zero equity situation, instead of a 20% drop in prices before the sale.

Selling and paying off debt is the same as selling and buying a bond that pays the same interest rate as your mortgage, so it does decrease real estate exposure.

Selling and buying more real estate obviously keeps exposure the same, so that part of your point is absolutely true.

[Cowboy89]

Originally Posted by bizaro86

The first part isn't true. If he owned 4 properties worth 250k before, each with 200k in debt, he had 1,000,000 of real estate with 800k in debt. If he sold one, and took the 50k to do mortgage paydown, now he has 3 properties worth 750k and 500k in debt.

So a 10% decrease would cost him 75k in equity instead of 100k in equity. Also, it would take a 33% drop in prices to get to a zero equity situation, instead of a 20% drop in prices before the sale.

Selling and paying off debt is the same as selling and buying a bond that pays the same interest rate as your mortgage, so it does decrease real estate exposure.

Selling and buying more real estate obviously keeps exposure the same, so that part of your point is absolutely true.

That would be correct, in a mortgage paydown situation exposure would be less due to a lower leverage factor. Had a brain fart on that one.

[Bill Bumface]

Originally Posted by Cowboy89

From the sounds of it you seem to have doubts about prices holding up long term and are looking for reasons why a decline might be delayed. If I were you and were satisfied with the paper gains on your property as it stands today I would sell and redeploy those funds away from Real Estate (EDIT: Corrected, If all you do is buy a new property), then you're just as exposed to a potential RE slide as before the sale). A good way to emotionally justify whether it's time to sell would be to think of yourself on the buying end of your property. Would you re-buy your property again at the price you're looking to sell it for? If not then it might suggest a value differential between the market and intrinsic value and thus 'Greater Fool' theory applies and you should get out while you can.

The thing is, as it sits, it hasn't done all that well. It's been a relatively short term hold, and one more year of mortgage payments paying down the principle puts it in a decent spot. Before that, and with a huge penalty if it gets sold earlier, it doesn't look so good.

I guess I have to decide if I think the odds are good of the value of the property dropping more than the penalty ($9-$10K) plus the amount of principle that will be paid off ($6K).

The money would go straight into other investments. I've got a crapload of unused RRSP room right now.

[chemgear]

Some more interesting reading:

http://www.theglobeandmail.com/repor...rticle2050160/


http://www.bnn.ca/News/2011/6/6/Apri...ly-plunge.aspx

EDIT:

Nice video on Global as well:

http://www.globalnews.ca/video/index...I87RYo3uZyim7m

[Bill Bumface]

Originally Posted by chemgear

Some more interesting reading:

http://www.theglobeandmail.com/repor...rticle2050160/

Kind of comforting to see that we may have gotten a bunch of our correcting over with early.