Calgary Real Estate predictions?

[Bill Bumface]

Originally Posted by red sky

So in a perfect situation would it be wise to sell your house now and rent for the next 2-3 years? Not that I am planning on doing that but I am just curious what others think.

I know of a guy that at the height of the boom sold absolutely everything. House, investments, put everything to cash.

He is just laughing. Bought everything back at a fraction.

[1stLand]

As long as income levels remain high, I am skeptical that prices will crash.

People simply will not be willing to sell their homes for less than they are worth, as long as they can continue paying off their mortgages.

If they want / need to move, then they will rent their home or condo out until they can sell it for a decent price.

[Bill Bumface]

Originally Posted by 1stLand

If they want / need to move, then they will rent their home or condo out until they can sell it for a decent price.

It seems everyone is doing this now. Great for renters, depresses the rental market.

The best case scenario is that things don't crash, but as prices look to improve, the market will continually be flooded with people looking to unload their rentals. Things will be soft for a long time (in my opinion).

[troutman]

Check out this San Fran real estate:

On Broadway: San Francisco’s 3 most pricey properties

http://blog.sfgate.com/ontheblock/20...ey-properties/

1. 2835 Broadway $38,500,000

[chemgear]

Carney keeps warning people of household debt - given the continued rise, it's obvious people are ignoring him. Though, I did find it interesting how he worded his recent comments:

http://business.financialpost.com/20...ps-norm-by-35/


Mr. Carney said when it comes to household debt “the message is one of prudence and caution,” adding that the average home price in Canada is about 4.75 times people’s income, while the historic average is closer to 3.5.

[Lt.Spears]

Out of curiosity, how old do most people on here want to be while still carrying a mortgage?

I think ideally i would be around 40 and no longer have a mortgage.

It seems to me like most people just keep wanting bigger and bigger houses and no matter how old they are, still have mortgages.

[Clarkey]

Originally Posted by chemgear

Carney keeps warning people of household debt - given the continued rise, it's obvious people are ignoring him. Though, I did find it interesting how he worded his recent comments:

http://business.financialpost.com/20...ps-norm-by-35/


Mr. Carney said when it comes to household debt “the message is one of prudence and caution,” adding that the average home price in Canada is about 4.75 times people’s income, while the historic average is closer to 3.5.

This needs more clarification from the Carnster. Who cares if your home price is 20x your income if you have a 90% down payment. I assume he's referring to the mortgage amount not the house price but he doesn't explicitly state it.

[Red]

Originally Posted by Clarkey

This needs more clarification from the Carnster. Who cares if your home price is 20x your income if you have a 90% down payment. I assume he's referring to the mortgage amount not the house price but he doesn't explicitly state it.

Average downpayment (or is it equity?) in Canada is 7%.

Vancouver and Toronto are at 10x income to house price ratio. You do the math.

[sclitheroe]

Originally Posted by Red

Vancouver and Toronto are at 10x income to house price ratio. You do the math.

How could this be possible? I thought the government had regulations stating banks couldn't issue mortgages with monthly payments of more than something like 32% of your monthly gross income. Or is that only for mortgages that require CMHC insurance?

[chemgear]

Speaking of which:

http://business.financialpost.com/20...rsight-report/

Finance Minister Jim Flaherty will introduce legislation as early as Thursday that may contain changes to the oversight of Canada Mortgage & Housing Corp., Bloomberg News reports.

In his March 29 budget, Flaherty said the government will introduce “enhancements to the governance and oversight framework” for CMHC, which insures mortgages and guarantees mortgage-backed securities issued by banks.

[Winsor_Pilates]

Originally Posted by sclitheroe

How could this be possible? I thought the government had regulations stating banks couldn't issue mortgages with monthly payments of more than something like 32% of your monthly gross income. Or is that only for mortgages that require CMHC insurance?

It's not possible
The stats are based on the average detached home price vs average incomes.
In Vancouver, detached home prices are extremely high so when compared to average income they are somewhere around 9-10X.

What the stat doesn't show it that the people making that average income aren't the ones buying those detached homes. They're buying condos/townhouses or properties in Richmond, Surrey, Coquitlam etc.

The people who are buying those homes have large equity from past properties, are wealthy or wealthy immigrants.

It's not people with household incomes of $70K and no previous equity buying the $1M homes.

[chemgear]

No timeline or any kind of formal announcement - just interesting that they would even publically talk about it as a possibility.

http://business.financialpost.com/20...flaherty-says/

CMHC could be pulled out of mortgage insurance business, Flaherty says.

[Red]

Originally Posted by chemgear

No timeline or any kind of formal announcement - just interesting that they would even publically talk about it as a possibility.

http://business.financialpost.com/20...flaherty-says/

CMHC could be pulled out of mortgage insurance business, Flaherty says.

Looks like they either want to separate themselves from the housing business or it's just more lip service to try and slow down the market.

Either way, this is just more bad press for RE.

[chemgear]

The National had an interesting segment last night, silly people in Vancouver and Toronto.

http://www.cbc.ca/video/#/Shows/The_.../ID=2229183570

[bizaro86]

Originally Posted by chemgear

No timeline or any kind of formal announcement - just interesting that they would even publically talk about it as a possibility.

http://business.financialpost.com/20...flaherty-says/

CMHC could be pulled out of mortgage insurance business, Flaherty says.

I would certainly be in favour of this. I think it would make risk be priced more sensibly, and that alone would provide more balance to the housing market.

[chemgear]

Here is part two of segment from The National - very good roundtable discussion.

http://www.cbc.ca/thenational/indept...ng_market.html

Again, it's really interesting how the public/media sentiment is shifting even though things have been pretty consistent for years now.

[ah123]

Garth Turner putting his sights on the Calgary market now

http://www.greaterfool.ca/2012/05/01/death-by-condo/

I am not sure what to make of his articles, it's almost funny, but then I don't know if there that many people who are really that reckless with their money (i.e. looking at real estate as a way to quickly make money)

[yads]

Originally Posted by fotze

So CMHC would give us back all the premiums we had paid to that scamola over the years?

Doubtful, since in return for your premiums you likely received favorable rates from the banks. Without the CMHC insurance, you likely would have faced higher mortgage rates.

[bizaro86]

Originally Posted by yads

DoubtfulNot a chance, since in return for your premiums you likely received favorable rates from the banks. Without the CMHC insurance, you likely would have faced higher mortgage rates.

FYP

No way they're going to give any money back. But if they stop now it'll take the government off the line on a go forward basis, which would be a good thing, imo.

[Cowboy89]

Originally Posted by ah123

Garth Turner putting his sights on the Calgary market now

http://www.greaterfool.ca/2012/05/01/death-by-condo/

I am not sure what to make of his articles, it's almost funny, but then I don't know if there that many people who are really that reckless with their money (i.e. looking at real estate as a way to quickly make money)

I laugh at that advertisement he's got as the picture.

On the annual cash flow part:

• completely ignores how much it will cost to find tenants and to maintain the condo (Over the 10 year holding period I imagine that alone would probably eat up the positive monthly CFs).
• Ignored is the concept that you would have to re-fi your mortgage in 5 years at rates most likely well north of the 3.5% rate used to come up with the mortgage calc which will most likely offset any increases in rent earned.

On the Capital Gain part:

• Selling costs are completely ignored
• Overall return on equity is misleading because it's a 10-year return as opposed to an annual return. Once you realize that the CF is probably negative for 10 years, your illiquid investment is essentially depending on abnormal price appreciation to beat the returns on a well-diversified portfolio and even then might not compensate for the lack of liquidity