Calgary Real Estate predictions?

[Slava]

Originally Posted by macker

David Rosenberg said recently that there is another 20% drop to come in US real estate so where does that leave us... I agree with what Bill Gross said recently that Canadians are in denial if they aren't willing to learn from the US experience over the past few years. Once these things correct they don't just bounce back right away and it takes years and years to have a sustainable recovery.

So we have many of analysts and experts and even bank of Canada officials giving out warnings and people still think that we operate on different metrics here.....go read http://www.amazon.ca/This-Time-Diffe.../dp/0691142165 and tell me that things don't have to correct. This book tells you everything you need to know in a very logical manner, or for more specific info http://canadabubble.com/

I don't see anyone arguing that the markets are all completely recovered here though? Instead the argument is that we've seen a correction (as evidenced numerous times in this thread), so while things are stable/stabilizing at this time the idea that we would see a correction from these levels doesn't make sense. I know that there are "experts" out there, and frankly we've seen their projections over the last few years. IIRC David Wolf from Merrill Lynch put out a projection for the year (a couple of years ago?) that had the housing market absolutely cratering. We either survived that crash, or I just missed it?

I'm not arguing that we can't go down from here. We can definitely go down, and we'll either go down, up or stay the same. Its just that the doom and gloom is an easy target at this point in the economic cycle and while the recovery is a long and sometimes tenuous road that doesn't mean that we are destined for the days of a painful correction.

[Winsor_Pilates]

Originally Posted by kevman

Apparently my numbers made no sense...

What I was trying to say is that while the median has only gone down 5% the actual cost of purchasing a home has gone WAY down. Or in other words the price people are willing to pay has gone WAY down.

Your numbers made sense, thanks for posting them. However your analysis of the numbers does not make sense IMO.

Your analysis is very similar to the RBC affordability study done earlier this year that I posted somewhere back in the thread. Basically, Calgary is in a 20 year best for affordability when you look at monthly payments/incomes, because of where rates are.

What you're saying is "willing to pay" I would call "needing to pay". Right now, with rates where they are and incomes in Calgary where they are, most people are handling their payments quite well and in an easier situation than they were 5 years ago.

Originally Posted by 1stLand

For someone looking at getting into the real estate market (1st Time Homebuyer) who does not have job security or is just entering the job market.

1. Do not over-extend yourself - Buy something you can afford (ie: Condo's / Townhome)
2. Prepare to own this home for atleast 5 years
3. Expect fluctuations in the value of your home for the next few years
4. Budget for repairs and miscellaneous expenses
5. Take on a room-mate if possible

Good list; my list for FTB is very similar (of course, pt.5 depends on the individual situation)
I also encourage them not to look at their primary residence as an investment play. If the market goes up and they want to switch, they'll sell higher but buy back in higher anyway, so they shouldn't be overly concerned with flipping their primary residence.

[AFireInside]

Originally Posted by Realtor 1

So what do you suggest I tell these early 20s buyers. There is a chance that the market slides for the next 10 years so do not buy?
The market does not have to spike for them to be successful in their investment. Real Estate is one of the safest investments (for its return) available to people.
I guess those who say it is not a good idea for these early 20's university graduates working in land mgmt or other stable industries need to tell me what they think is smart. I understand everyone has a take however sacrificing a few bar nights per week or vacations per year is a small price to pay to own a place.

You are simplifying that waaaay too much.. A few bar nights a week? Who's going to the bar a few nights a week?

YOU don't tell those buyers anything because you are trying to make money, and it's not your job to make life choices for people.

What should be told those early 20's buyers is to save money for a proper down payment. However I do understand that a proper down payment in this market is not going to happen because prices are too high, and 5 - 7 % is likely the most they will be able to save.

This is not about whether the market slides. This is about someone entering the workforce, without really knowing their job security situation. Get into the workforce for a couple years first, get a feel, save some money, (obviously at least 5%).

I know this is not likely for most (prob mysefl included), but this is how it SHOULD be.


You said in a previous post not to over-extend yourself. Isn't 5% down 35 yrs, over extending in a way? If they have to cut out activities to make ends meet, maybe they can't really afford it?

[AFireInside]

Originally Posted by 1stLand

For someone looking at getting into the real estate market (1st Time Homebuyer) who does not have job security or is just entering the job market.

1. Do not over-extend yourself - Buy something you can afford (ie: Condo's / Townhome)
2. Prepare to own this home for atleast 5 years
3. Expect fluctuations in the value of your home for the next few years
4. Budget for repairs and miscellaneous expenses
5. Take on a room-mate if possible

Also I find it funny saying buy something you can afford. Often a townhome while having a lower price, will cost the same monthly as a house after you add in condo fees.

Lets see a 250,000 townhome with 200 a month for condo fees. Townhomes often don't include electricity and/or heat so add that in.

OR

A 300,000 house. Often the money per/mth will be very similar.

200 - 250 bucks per month onto your mortgage payment for condo fees is quite steep. If you move up 50,000 in your mortgage for a house it will be verrrry similar.

That said there are other advantages to a townhouse!

[bomber317]

Originally Posted by AFireInside

Also I find it funny saying buy something you can afford. Often a townhome while having a lower price, will cost the same monthly as a house after you add in condo fees.

Lets see a 250,000 townhome with 200 a month for condo fees. Townhomes often don't include electricity and/or heat so add that in.

OR

A 300,000 house. Often the money per/mth will be very similar.

200 - 250 bucks per month onto your mortgage payment for condo fees is quite steep. If you move up 50,000 in your mortgage for a house it will be verrrry similar.

That said there are other advantages to a townhouse!

Don't forget to consider that your electricity/heat/gas/insurance/maintenance will most likely be higher as well depending on the size of your home. So don't forget that in your calculations as well.

[newts]

Originally Posted by Realtor 1

-Taking on a room mate leads to more issues than it would if you just purchased a place you could afford on your own.
- Why prepare to live in the place for 5 years. My last 2 foreclosures will see at least $30,000 in instant equity. Why wouldnt they sell in a couple years if there was a life change.

Your response on a room mate is just as trivial as saying you should get one. Not everyone sees a room mate as a bad thing. And if you want to cut your expenses, why not do this? It works for a lot of people.

And on the five year thing, the large majority of real estate transactions don't result in 30% equity overnight. I tend to agree with the five year thing...try to anticipate what your five year life cycle will look like and try to get into a home that will suit that (kids/family on the horizon? Empty nest on the horizon?) Doesnt mean that you buy too much or too little house...its a home that you can be a little flexible with if need be. If you can do that, then you're minimizing potential penalties and costs for having to sell early.

[macker]

Originally Posted by Slava

I don't see anyone arguing that the markets are all completely recovered here though? Instead the argument is that we've seen a correction (as evidenced numerous times in this thread), so while things are stable/stabilizing at this time the idea that we would see a correction from these levels doesn't make sense. I know that there are "experts" out there, and frankly we've seen their projections over the last few years. IIRC David Wolf from Merrill Lynch put out a projection for the year (a couple of years ago?) that had the housing market absolutely cratering. We either survived that crash, or I just missed it?

I'm not arguing that we can't go down from here. We can definitely go down, and we'll either go down, up or stay the same. Its just that the doom and gloom is an easy target at this point in the economic cycle and while the recovery is a long and sometimes tenuous road that doesn't mean that we are destined for the days of a painful correction.

They aren't completely recovered and will eventually experience further downside that is almost a certainty. What is going to make this market go up? David Wolf is hardly an expert but when Bill Gross speaks you have to pay attention. Nevermind the experts though as you can get a good idea from talking to your neighbors who can't sell their homes or realtors that have taken up going door to door to try to drum up business. I don't think you can call it a bubble but just a slow leak of air that could go on for years to come.

You were saying that this should have happened by now as this thread is 2 years old but we have likely seen phase one of a two or three phase correction that could last 5 years or more. The US bond market is one of the biggest financial bubbles ever. Investors are finally waking up to the enormous risks in the financial system by selling government debt. As a result both short and long term interest rates will likely surge in 2011/2012 and reach double digits in the next few years. So....you get the picture....I don't know if it is doom and gloom or being intelectually honest.

We now live in a world where governments print worthless pieces of paper to buy other worthless pieces of paper that combined with worthless derivatives, finance assets whose values are totally dependent on all these worthless debt instruments. Thus most of these assets are also worth-less. "Paper money eventually returns to its intrinsic value Zero" - Voltaire 1729.

[chemgear]

I wouldn't describe it in that fashion but I'd more looking at simple supply and demand in the sector myself.

Demand, as recently reported, is fairly consistently the lowest in a decade in spite of record low interest rates. Supply has been well above CREA's "balanced" supply/sales ratio of 1.5-3.5 for many months now.

With the real potential for increased interest rates, further mortgage restrictions, the high debt loads and the inventory overhang, it still (seems to me) that there is quite a ways still to go to any real equilibrium.

Unless of course the general supply/demand fundamentals don't apply over time then who knows.

(BTW, liking the good discussion and information in the tread recently.)

[1stLand]

Originally Posted by Realtor 1

-Taking on a room mate leads to more issues than it would if you just purchased a place you could afford on your own.
- Why prepare to live in the place for 5 years. My last 2 foreclosures will see at least $30,000 in instant equity. Why wouldnt they sell in a couple years if there was a life change.

$30,000 in instant equity?
1. What about Realtor fees when he goes to sell?
2. Legal Fees
3. Mortgage Penalties

Are you also guaranteeing that the market has bottomed out? That $30,000 in instant equity will dry up pretty quick in two years if the market consistently adjusts downwards in addition to the added costs of my 3 points.

[Burninator]

Originally Posted by bomber317

Don't forget to consider that your electricity/heat/gas/insurance/maintenance will most likely be higher as well depending on the size of your home. So don't forget that in your calculations as well.

As a condo owner I've had lots of people say pretty much the same thing as Afireinside said. That I should have just used the money that would have gone into condo fees and put it into the mortgage for a house. It seems like some people think that condo fees go to nothing and that all those costs you listed are free in a house.

[chemgear]

I guess this was put out a few days ago (missed it myself.) Was this sent around to all realtors?

[moncton golden flames]

Originally Posted by chemgear

I guess this was put out a few days ago (missed it myself.) Was this sent around to all realtors?

so, how would these type of rules affect current home owners?

[Mike Oxlong]

Originally Posted by chemgear

I guess this was put out a few days ago (missed it myself.) Was this sent around to all realtors?

Wow that's intersting. Working in the mortgage industry I haven't seen anything like this sent out to us just yet. I had heard speculation on the tightenting of some rules but didn't think it was that big of a concern as I thought it was pure speculation.

The owner of Dominion Lending Centres who I work for has been invited to a conference with Jim Flaherty later this month (as well as a number of other industry leaders) to discuss potential options and the effects they may have.

It wil be interesting to hear what comes from the meeting. I believe it happens on the 19th. I'll be sure to post any info I hear.

[bomber317]

Originally Posted by moncton golden flames

so, how would these type of rules affect current home owners?

I believe it should not until you need to renew your mortgage. If you have a 35 year amortization term, probably would have to recalc it to 25 years when you renew.

Not sure what they would do about the higher deposit if your equity hasn't reach the x% of your mortgage value.

[moncton golden flames]

Originally Posted by bomber317

I believe it should not until you need to renew your mortgage. If you have a 35 year amortization term, probably would have to recalc it to 25 years when you renew.

Not sure what they would do about the higher deposit if your equity hasn't reach the x% of your mortgage value.

i know you're somewhat speculating, but if i'm on a 25 yr already, should i have concerns or do you think these type of rules will not affect me?

[bomber317]

Originally Posted by moncton golden flames

i know you're somewhat speculating, but if i'm on a 25 yr already, should i have concerns or do you think these type of rules will not affect me?

Mike Oxlong would have better answers since he's an actual mortgage broker, but I'd imagine if you are on 25 year already it should not affect you for that aspect.

As for raising the deposit, I am unsure what the banks would do for existing mortgages.

[albertGQ]

Originally Posted by bomber317

I believe it should not until you need to renew your mortgage. If you have a 35 year amortization term, probably would have to recalc it to 25 years when you renew.

Not sure what they would do about the higher deposit if your equity hasn't reach the x% of your mortgage value.

I doubt that. I bet they grandfather all existing mortgages like when they decreased the maximum from 40 years to 35

[Winsor_Pilates]

I've never seen that before. Where did you find it, maybe a fake??

[chemgear]

Originally Posted by Winsor_Pilates

I've never seen that before. Where did you find it, maybe a fake??

Wow, hope not! Saw it here - is he not legit?

http://www.teamfisher.com/

http://www.teamfisher.com/tighter-mo...-economy-crea/

Fake website/not a realtor?

EDIT: Hmmm, he does come up on the member search but I guess they could have randomly just picked a name for fake website . . . no idea.

http://www.srar.ca/member.php3?Search=display#Res

[AFireInside]

Originally Posted by Burninator

As a condo owner I've had lots of people say pretty much the same thing as Afireinside said. That I should have just used the money that would have gone into condo fees and put it into the mortgage for a house. It seems like some people think that condo fees go to nothing and that all those costs you listed are free in a house.

I was referring to townhouses more than condo's. A condo gets more included with their condo fees then a townhouse typically. Of course it also depends what you pay.

I'm referring more to those townhouses that are in the 250,000 - 280,000 range in neighborhoods where houses are going for 300 or so. Doesn't make a lot of sense since a townhouse usually includes nothing in the fees like utilities or heat.

I remember one townhouse in particular, same age roughly as the houses in the neighbourhood (decent neighbourhood as well). They were asking 30,000 - 40,000 less than what I'd seen houses go for.

Again, this isn't EVERY townhouse, and there are definitely some advantages to living in this scenario and I'm certainly not against it, but if its going to cost me near the same I'm taking the house.