Calgary Real Estate predictions?

[photon]

Originally Posted by Nancy

Projections likely based on $100 oil...

You think they have a line in a spreadsheet to put a barrel of oil price into when projecting population growth? I think they are a bit more sophisticated than that.

Originally Posted by Shazam

The point of a down payment is so that if a property's value goes down and the borrower defaults, there's enough equity left that the bank minimizes their losses in a foreclosure. Where's the cushion on a 40/0? A 40/0 500K mortgage @ 5% after four years results in an equity position of 18K.

True, and that's probably why it went away. But having no buffer isn't the same as having a mortgage that has a negative equity position, the borrower is at a 70% debt servicing ratio, and is already on collections lists for 3 different cell phone companies.

Risk is based on the borrower, not the product. While a 40/0 product may attract a more marginal borrower, it doesn't necessarily mean that they'll get it; the lending rules here were far more strict and well enforced. In the US it was like they gave it to everyone based on the increase in housing prices, very little of that went on here. As I said, only a few percent of mortgages in Canada are sub-prime.

And if I remember reading correctly the typical default rate on mortgages in Canada is lower as well.

EDIT: Exactly, no one is saying it's going to be roses and unicorns, but if there's a storm coming you take shelter in the best place possible.. I think Alberta will fare better than many other places.

[megatron]

I haven't read the entire thread, but have any of you seen this report on 60 Minutes (aired Dec 14, 2008) about where the mortgage meltdown bottom is?

It's quite interesting because they talk about two other loan types: ALT-As and Option-ARMs that haven't even started to come up for renewal yet (they will later in 2009 and in 2010). The main guy in the story (can't remember his name) says that while the USA is 1/2 way (or 2/3 of the way) through the sub prime mess, the above two types of mortgages will cause more pain for a couple more years.

I wonder how this will effect Canada's/Alberta's/Calgary's economy further (or if it will)? and how long until we see the trending upward?

Link:
http://www.cbsnews.com/video/watch/?id=4668112n

[macker]

Originally Posted by megatron

I haven't read the entire thread, but have any of you seen this report on 60 Minutes (aired Dec 14, 2008) about where the mortgage meltdown bottom is?

It's quite interesting because they talk about two other loan types: ALT-As and Option-ARMs that haven't even started to come up for renewal yet (they will later in 2009 and in 2010). The main guy in the story (can't remember his name) says that while the USA is 1/2 way (or 2/3 of the way) through the sub prime mess, the above two types of mortgages will cause more pain for a couple more years.

I wonder how this will effect Canada's/Alberta's/Calgary's economy further (or if it will)? and how long until we see the trending upward?

Link:
http://www.cbsnews.com/video/watch/?id=4668112n

Didn't Jim Cramer call the bottom in the US for June 30, 2009 and doesn't he know everything http://www.elitetrader.com/vb/printt...hreadid=151233

If you take a city like Houston they seem to be basing whereas a city like Miami seems to be still in tank mode.....http://www.homepricetrend.com
I guess we can ask the US equivalent of Crebs for their prediction....I wonder if they have started using psychics yet....

[metal_geek]

In a "Normal" enviroment, the average home price should be 3:1 to the average yearly household income. If the average income in calgary is 80,000.00/year the average home price should be 240,000K...

That's of course varies to 4:1 in a "Hot Market" but anymore then that and tive the affordability is outta wack. Some of the places in the US like san diego are at 10:1 and higher... The more the price is out of wack with the average income the more creative the financing has to be "on average"...

That's where the price should be in calgary and how it gets back to there is anyones guess, but a smooth and slow ride to it would be nice but unlikely..

[photon]

I'd agree that in that 3:1 to 4:1 area is an ideal zone.

And Calgary isn't that far out compared to other places, so we have a lot less ground to cover than Vancouver or San Diego. Plus Calgary's salaries have been increasing faster than the rest of Canada so that affects the affordability from the other side (though of course now with the recession that's not going to continue).

Different areas also naturally have different affordability. Vancouver because it is restricted with respect to available land, so scarcity and building up instead of out drives up costs. Downtown areas cost more for the same reasons coupled with demand. Some places are just so much nicer to live than other places and are desirable. Some places are dumps, Regina had a 2.1:1 I think a few years ago lol.

Some places have lots of jobs high paying jobs and lower taxes, so people want to move there. That's what happened to Calgary.. economic woes aside, the price decreases were coming anyway. Huge influx of people, limited inventory, prices go up. Supply tries to catch up, overshoots, excess inventory, prices drop.

I had a really cool graph but I can't seem to find it.

[ikaris]

Originally Posted by macker

Didn't Jim Cramer call the bottom in the US for June 30, 2009 and doesn't he know everything http://www.elitetrader.com/vb/printt...hreadid=151233

Actually he's just a loudmouth whose recommendations tend to be worse than average. Makes a good soundbite though.

http://www.erictyson.com/articles/20080922

http://yourmoneywatch.com/

http://www.cxoadvisory.com/gurus/Cramer/

[Nancy]

Originally Posted by photon

You think they have a line in a spreadsheet to put a barrel of oil price into when projecting population growth? I think they are a bit more sophisticated than that.

No, I don't think they are even that sophisticated. They simply assume the current growth trend continues into the future forever, simply extrapolating last year's number into the future without any consideration of fundamental changes occuring: that a growth rate the flawed assumption is that applied to an environment of $100 oil will apply in an environment of $30 oil.


EDIT: Here is the reference I neglected to include in my original comment about the decline of interprovincial in-migration:

http://www.cbc.ca/canada/albertapoli...-statscan.html

[photon]

Originally Posted by Nancy

No, I don't think they are even that sophisticated. They simply assume the current growth trend continues into the future forever, simply extrapolating last year's number into the future without any consideration of fundamental changes occuring: that a growth rate the flawed assumption is that applied to an environment of $100 oil will apply in an environment of $30 oil.


EDIT: Here is the reference I neglected to include in my original comment about the decline of interprovincial in-migration:

http://www.cbc.ca/canada/albertapoli...-statscan.html

Well last time I listened to the chief economist of Alberta talk about population projections I think they talked about how they spoke with large companies and asked about their projections for employment and such, followed trends in individual industries and considered changes in those industries based on how many people in those industries were employed in Alberta, etc. He didn't go into much detail as the talk was about something totally different, but it sounded a lot more involved than simply projecting the current trend.

I do recall seeing that info about the in-migration as well, I remember because there was one part where you could finally say that more people moved from Alberta to Sask than the other way.. and the number was like "5" or something, so it made me laugh.

And that is something to consider, because while places like Vancouver have strong immigration, Alberta's population growth typically is more from in-migration. But the total #'s for 2008 total were still very strong.

Not sure when the projection for 51,000 for 2009 was made either.

[macker]

Originally Posted by ikaris

Actually he's just a loudmouth whose recommendations tend to be worse than average. Makes a good soundbite though.

http://www.erictyson.com/articles/20080922

http://yourmoneywatch.com/

http://www.cxoadvisory.com/gurus/Cramer/

Agreed. He had the 2nd worst quote of 2008 when he said :

"No! No! No! Bear Stearns is not in trouble." —Jim Cramer, CNBC commentator, Mar. 11, 2008

The worst :
"In today's regulatory environment, it's virtually impossible to violate rules." —Bernard Madoff, one-time Nasdaq Chairman & 50B scam artist

[Jason14h]

http://www.calgaryherald.com/Life/Sh...957/story.html

The real estate firm says the average price for a standard two-storey home in the city fell to $408,263 in the fourth quarter, down by 11.6 per cent from the fourth quarter of 2007. The standard condominium average price dropped by 9.5 per cent to $257,189, and the standard detached bungalow fell by 4.5 per cent to $410,333.

[metal_geek]

http://ca.news.yahoo.com/s/capress/0...l/house_prices

Royal LePage says the average price of detached bungalows dipped by 4.8 per cent during the quarter to $319,640.

The average cost of a standard condo fell 5.2 per cent to $233,230 and the average for a standard two-storey home fell 6.3 per cent to $376,140.

That's just the 4th Quarter...


They end the article with this heart warming tidbit...

Royal LePage says 2009 should bring gradual improvements as low mortgage rates and government efforts to revive the economy begin to take hold.

And by that they mean hopefully this year, 1% lower rates then at the boom, and this stimuls that's supposed to put all kinds of disposable cash in our pockests will lead to slower declines and not the avalance they saw in the last quarter... Thats's a lot of wishful thinking but was phrased nicely by a realtor group....

[Burninator]

Calgary home rated 'seriously affordable'

An international report says Calgary housing is "seriously unaffordable" and at the same level as Toronto.

The 5th Annual Demographia International Housing Affordability Survey looked at third-quarter 2008 data in 265 metropolitan markets across the globe, including Australia, Canada, the Republic of Ireland, New Zealand, the United Kingdom and the United States.

The survey of housing afford-ability said Calgary and Toronto were tied for 29th in Canada and 190th in the world.

To assess affordability, Demographia divided median house prices in individual markets by the median annual gross house-hold income.

In Canada, on average, citizens require 3.5 years of annual income to purchase a home. In Calgary, it would take 4.8 years.

http://www.calgaryherald.com/busines...822/story.html

[troutman]

MLS sales down 50% in January (wow):

http://www.calgaryherald.com/Homes/C...916/story.html

No matter how you look at it, Calgary's resale housing market took a beating in January compared with a year ago.

MLS sales plunged by a staggering 50 per cent, sending the average sale price of a single-family down by over nine per cent and 13 per cent for condominiums, according to the Calgary Real Estate Board.

[SeeGeeWhy]

Originally Posted by photon

I'd agree that in that 3:1 to 4:1 area is an ideal zone.

I'm intrigued by this rule of thumb...

Would you say that this is a good rule for an individual to target for their own housing situation - i.e. go buy a house that is 3 - 4x your annual household income?

I know that in my case, I wouldn't be doing that so I am not sure where the 3 - 4x rule comes from.

[JustAnotherGuy]

Originally Posted by troutman

MLS sales down 50% in January (wow):

http://www.calgaryherald.com/Homes/C...916/story.html

No matter how you look at it, Calgary's resale housing market took a beating in January compared with a year ago.

MLS sales plunged by a staggering 50 per cent, sending the average sale price of a single-family down by over nine per cent and 13 per cent for condominiums, according to the Calgary Real Estate Board.

I would like to know the sales numbers for the last 5 years. Was January 2008 a higher sales total than previous years? To me these kind of facts may not give the full story. Statistics can be manipulated sometimes.

An example. I can say that gas prices has plunged in the last 8 months or so. Which they have but it doesn't mention that gas prices had climbed for months before that. So now gasoline prices are simply back to where they were 4 years ago.

So are the January sales totals simply back to where they were before?

[Slava]

Originally Posted by SeeGeeWhy

I'm intrigued by this rule of thumb...

Would you say that this is a good rule for an individual to target for their own housing situation - i.e. go buy a house that is 3 - 4x your annual household income?

I know that in my case, I wouldn't be doing that so I am not sure where the 3 - 4x rule comes from.

Well the 3-4 figure is generally what you will be approved for to get a mortgage. as you income rises to $100k or more though this is relaxed somewhat and you can qualify for more.

[Suave]

Originally Posted by JustAnotherGuy

I would like to know the sales numbers for the last 5 years. Was January 2008 a higher sales total than previous years? To me these kind of facts may not give the full story. Statistics can be manipulated sometimes.

An example. I can say that gas prices has plunged in the last 8 months or so. Which they have but it doesn't mention that gas prices had climbed for months before that. So now gasoline prices are simply back to where they were 4 years ago.

So are the January sales totals simply back to where they were before?

Actually sales for January 2008 were already down (looking at single family homes).

Year Sales
2009 550
2008 1,030
2007 1,787
2006 1,762
2005 1,171

[mots]

This is a good site for real estate stats...

http://www.bobtruman.com/SFH_Monthly...e_1869385.html

[photon]

Originally Posted by SeeGeeWhy

I'm intrigued by this rule of thumb...

Would you say that this is a good rule for an individual to target for their own housing situation - i.e. go buy a house that is 3 - 4x your annual household income?

I know that in my case, I wouldn't be doing that so I am not sure where the 3 - 4x rule comes from.

What Slava said.

In general that seems to be used when evaluating economies on a large scale, cities, provinces, countries, and economists say that 3-4 rage is healthy for the population.

I'm not sure I totally buy that as there are other factors.. places like Vancouver where land is limited so things are always going to be higher than that range. Or large cities where the downtown core is always higher because of scarcity and demand.

I like the percentage of income a little better since it takes interest rates , different mortgage types, etc into account as well (cost of ownership as a percentage of a person's annual income). 40%ish for Calgary, 70% or more for Vancouver.

[Nancy]

Calgary plotted on the Case-Shiller Graph:

http://i44.tinypic.com/w6s3ur.jpg