Real estate in Calgary - another bubble?

[sketchyt]

Originally Posted by Sliver

Nah, good luck with that. $20/hour is going to net you $31.5k after tax. Double that for two people in the house and you have a net pay of $63k. That leaves $5250/month. After utilities, insurance, phones, Internet, property tax, etc. you're at a monthly nut of about $4200. That leaves about $1000 for food, vehicle costs (payments, insurance, registration, maintenance), potential student loans, clothes, entertainment, etc. and we haven't even touched on ongoing household maintenance costs or life emergencies.

Basically, you would be completely out of your mind to spend $510k on a house if you and your partner are making $20/hour. I can't even imagine.

I read that comment in the category of: technically do-able but not a great idea.

[nik-]

These values seem like a mirage. Even value estimator sites are all over the map. HonestDoor seems the most "optimistic". It's showing me just under 10% growth in a year. There's no way my house sells for what they value it at. I don't think every area will pull back, but this can't be sustainable.

[Matata]

Originally Posted by opendoor

They think (not that you can really call it that) that the government is going to lock them into their "zone" and not let them leave.

There's a few cases, such as Oxford and Canterbury, where there are strict limitations and fines for where you can and can't drive your vehicle. These are also really old cities and the issues they are dealing are pretty far removed from where your typical NA city is at.

[opendoor]

Originally Posted by sketchyt

I read that comment in the category of: technically do-able but not a great idea.

It's not even technically doable, even if we accept that 2 people making $20/hr can save up a $51K down payment in any reasonable time frame.

The maximum Gross Debt Service ratio for insured loans is 39%; so at $20/hr for 2 people, that means they can be spending $2,600/month on their mortgage, property tax, heating, and 50% of condo fees (if any). Just the $2,700 mortgage alone is too high, and that doesn't even get into the stress test, which would require them to qualify for a $3,100-3,200 monthly payment (plus those other costs).

Assuming 10% down on $510K ($459K mortgage), the buyer would need to qualify for a $3,150 payment. Add in about $500/month for property tax and heating costs and you're at $3,650. If you divide that by the 39% max for GDS, and they'd need to earn about $9.4K/month, which is $113K a year (or $28/hr or so) to get that house with 10% down.

By contrast, two people making $20/hr would only qualify for about a $310K loan, so with 10% down they could afford about $344K. But then, virtually anything that cheap has condo fees as well, so that would drive down the maximum loan amount even more, probably into the $280K range.

[Old Yeller]

There are currently two homes for sale in Calgary on realtor.ca for under $275K... neither listing has pictures of the inside.

[opendoor]

Originally Posted by Matata

There's a few cases, such as Oxford and Canterbury, where there are strict limitations and fines for where you can and can't drive your vehicle. These are also really old cities and the issues they are dealing are pretty far removed from where your typical NA city is at.

Congestion charges have existed in European cities (and Singapore) for decades. Those are no different.

[you&me]

Originally Posted by Sliver

Nah, good luck with that. $20/hour is going to net you $31.5k after tax. Double that for two people in the house and you have a net pay of $63k. That leaves $5250/month. After utilities, insurance, phones, Internet, property tax, etc. you're at a monthly nut of about $4200. That leaves about $1000 for food, vehicle costs (payments, insurance, registration, maintenance), potential student loans, clothes, entertainment, etc. and we haven't even touched on ongoing household maintenance costs or life emergencies.

Basically, you would be completely out of your mind to spend $510k on a house if you and your partner are making $20/hour. I can't even imagine.

Completely agree, but I never said it was a good idea...

Originally Posted by sketchyt

I read that comment in the category of: technically do-able but not a great idea.

Exactly. I'm pretty sure - technically - a mortgage under the scenario I posted would be approved based on DSR.

Again, not a good idea, but far more "affordable" for the hypothetical couple in Calgary than anywhere else in Canada you'd want to live...

Edit:

Originally Posted by opendoor

It's not even technically doable, even if we accept that 2 people making $20/hr can save up a $51K down payment in any reasonable time frame.

The maximum Gross Debt Service ratio for insured loans is 39%; so at $20/hr for 2 people, that means they can be spending $2,600/month on their mortgage, property tax, heating, and 50% of condo fees (if any). Just the $2,700 mortgage alone is too high, and that doesn't even get into the stress test, which would require them to qualify for a $3,100-3,200 monthly payment (plus those other costs).

Assuming 10% down on $510K ($459K mortgage), the buyer would need to qualify for a $3,150 payment. Add in about $500/month for property tax and heating costs and you're at $3,650. If you divide that by the 39% max for GDS, and they'd need to earn about $9.4K/month, which is $113K a year (or $28/hr or so) to get that house with 10% down.

By contrast, two people making $20/hr would only qualify for about a $310K loan, so with 10% down they could afford about $344K. But then, virtually anything that cheap has condo fees as well, so that would drive down the maximum loan amount even more, probably into the $280K range.

Thank you taking the time to run the proper numbers

Even though my napkin math was off, I still think my general point stands that - for now - homeownership in Calgary is still (somewhat) reasonably attainable.

[blankall]

Originally Posted by nik-

These values seem like a mirage. Even value estimator sites are all over the map. HonestDoor seems the most "optimistic". It's showing me just under 10% growth in a year. There's no way my house sells for what they value it at. I don't think every area will pull back, but this can't be sustainable.

The prices will sustain as long as Canada's population continues to grow at its current rate, and the government takes no steps towards proper city planning or urban expansion, beyond appeasing existing home owners.

[MillerTime GFG]

Originally Posted by nik-

These values seem like a mirage. Even value estimator sites are all over the map. HonestDoor seems the most "optimistic". It's showing me just under 10% growth in a year. There's no way my house sells for what they value it at. I don't think every area will pull back, but this can't be sustainable.

The migration from Ontario and BC is significant. Housing is so much more affordable here, and now that many jobs have moved to remote, it is easier for people to make the move without changing employment.

I do think it's sustainable, as there's still a large gap in affordability.

EDIT - re: Honestdoor - it depends on the property. My house could likely sell for 50-75k above the value HD states.

[Yoho]

Originally Posted by blankall

The prices will sustain as long as Canada's population continues to grow at its current rate, and the government takes no steps towards proper city planning or urban expansion, beyond appeasing existing home owners.

This is a total myth, job loss is the most lagging indicator of recession . Once that domino finally falls due to interest rate hikes and corporate debt. it starts to get ugly quick and immigrants don’t change that.

It doesn’t matter what your amortization is if you lose your job and the market gets over saturated quick with listings to market.

[Twitchy15]

Originally Posted by you&me

I know that's the common trope - that nothing's affordable; young people will never be able to buy - but I think Twitchy's situation paints a different picture.

Even at a $510,000 sale price, with 10% down, the payments would be ~$2,700 per month. Not exactly cheap, but do-able for a young couple each employed full time, making ~$45k or ~$20/hr.

I think it's more telling that Twitchy's house achieved 3% annual growth; Calgary's market has been relatively flat is still affordable... for now.

I’m shocked just the way the housing market had been here I was hoping to break even last few years if we sold. We had to over pay to buy our new place so in the end not the huge profit it sounds like. Our current mortgage was about $2000 a month which was reasonable. $2700 is doable but getting pricey and our house is very basic simple 1960s house.

[Twitchy15]

Originally Posted by you&me

Completely agree, but I never said it was a good idea...



Exactly. I'm pretty sure - technically - a mortgage under the scenario I posted would be approved based on DSR.

Again, not a good idea, but far more "affordable" for the hypothetical couple in Calgary than anywhere else in Canada you'd want to live...

Edit:



Thank you taking the time to run the proper numbers

Even though my napkin math was off, I still think my general point stands that - for now - homeownership in Calgary is still (somewhat) reasonably attainable.

Definitely attainable if making decent salaries of 50-70k plus at least

[Muta]

As someone living on my own, think I'll just stay in my condo now and hammer the mortgage down as best I can. Living (owning) on your own is super expensive and if I sell for the slight profit I'll probably make, I'll just have to turn around and find a more expensive place given the increases in property values. Shoulda bought a townhouse at least five years ago! I want to stay in the inner city, so I'm looking at at least $450-500K for a decent one... if I'm lucky.

[nik-]

All I know is that I never want to own something with a condo fee again. Such a waste of budget.

[blankall]

Originally Posted by Yoho

This is a total myth, job loss is the most lagging indicator of recession . Once that domino finally falls due to interest rate hikes and corporate debt. it starts to get ugly quick and immigrants don’t change that.

It doesn’t matter what your amortization is if you lose your job and the market gets over saturated quick with listings to market.

You're implying we have a housing market that of still dependent on local economic conditions. That's not the case.

[Bill Bumface]

Originally Posted by Sliver

you're at a monthly nut of about $4200

I thought that was typically measured in ml, not $?

[Yoho]

Originally Posted by blankall

You're implying we have a housing market that of still dependent on local economic conditions. That's not the case.

What do you think the housing market depends on then? Are you under some illusion that the immigrants coming in are all millionaires to continue to support this housing bubble?

[blankall]

Originally Posted by Yoho

What do you think the housing market depends on then? Are you under some illusion that the immigrants coming in are all millionaires to continue to support this housing bubble?

A combination of immigrants/foreign investors and people who already have money, particularly baby boomers. The housing market is no longer supported by young working families.

Edit: to add to this, as the population grows and the housing stock remains relatively stable, a greater percentage of the bottom earners/net worth become irrelevant to the discussion, as they were never going to be able to afford housing in the first place. For example, if you only have $100k to spend, and the cheapest home is $250k, then you losing your job is irrelevant, as far as the housing market goes. We're at a place now where such a large percentage of the population is already outside of the market, that it would take an astronomical amount of unemployment to shake the market. Even then, that may not cause as drop as investors would probably still continue to scoop up homes, buying in multiples.

[The Yen Man]

House prices have gone up, but condos have stayed pretty much flat. My condo on Mark on 10th I bought 8 years ago has maybe gone up $20K from when I bought it.

I get that everyone wants to live in a detached house, but if we're talking about just homes in general (including condos), Calgary's still affordable enough for the median household income (last I looked up, it was $98K), that I honestly do not see any bubble bursting anytime soon.

[Table 5]

Originally Posted by The Yen Man

My condo on Mark on 10th I bought 8 years ago has maybe gone up $20K from when I bought it.

Lucky bastard. The condo I bought for $280K a decade ago is probably worth around $230K today.