Real Estate Freefall?

[photon]

Well vacancy rates are still super low so it would take quite a while for people to find no tenants.. though I agree you will see people who bought at a high price without checking what they could get for rent or expecting way higher rents than what's realistic are going to be burned. As they should be, making decisions without doing your homework first is dumb.

As for a $400k price not being realistic compared to costs, when as the cost of making something had anything to do with the cost of how much it sells for? Residential real estate prices are dictated by supply and demand. There are plenty of cities out there with much higher prices for far crappier places, while there are also places where I could sell my normal house here and buy a huge stone house with a pool.

I don't think this is the beginning of the crash that everyone's been predicting for years now (always at this time of year too)... The current situation is supported by the economics, what economics are chaging to cause the crash (beyond the "it's not fair" angle)?

[Flames2007FIRE IT UP]

I think the market is just stabilizing, this kind of growth can not be sustained. The only way you will see a true drop in prices is if the federal government steps in to stop inflation and interest rates go up. This will only happen with a majority government, and I don't know how the rest of Canada is doing inflation wise so I have no idea if they would even take that step.

[photon]

I think they think the fallout from the subprime stuff will creep across the border and have some cooling effect, so they won't raise rates. Plus the rest of the country is doing pretty good on inflation, it's mostly Alberta that's really high:

http://www.statcan.ca/english/Subjects/Cpi/cpi-en.htm

[kermitology]

Well I just bought a place in Inglewood on Tuesday. I'd been watching prices since June and they're pretty decent right now (considering the market) but my realtor suggested that once February hits we'll see things climb up again. It's just settling.

[Slava]

Originally Posted by photon

I think they think the fallout from the subprime stuff will creep across the border and have some cooling effect, so they won't raise rates. Plus the rest of the country is doing pretty good on inflation, it's mostly Alberta that's really high:

http://www.statcan.ca/english/Subjects/Cpi/cpi-en.htm

The subprime will spread only because institutions here have bought the loans. Otherwise the lending practices in Canada are markedly different from the US and the direct implications are much lower, to say the least.

[RougeUnderoos]

Originally Posted by photon

I don't think this is the beginning of the crash that everyone's been predicting for years now (always at this time of year too)... The current situation is supported by the economics, what economics are chaging to cause the crash (beyond the "it's not fair" angle)?

That's what I'm kind of wondering myself. The big boom was fuelled by, well, fuel I guess. People still need that fuel, far as I can tell.

I'm no econonomist but I can't see "freefall" in Calgary while so much money is pouring in. I don't think it works that way.

[MoneyGuy]

Free fall? I highly doubt it, although I'd love to see it happen.

I'd be doing the happy dance, but it won't happen.

[Sylvanfan]

Originally Posted by MoneyGuy

Free fall? I highly doubt it, although I'd love to see it happen.

I'd be doing the happy dance, but it won't happen.

So you being a financial planner....would like to see like 75% of the population go broke and basically be left with no money? I mean if the real estate market crashes big time chances are there are other things like stock market crashes, money market crashes, and commodity market crashes that drive it. In short if the real estate market does crash so hard.....chances are everyone is going to be screwed one way or another.

[FireFly]

Originally Posted by Sylvanfan

So you being a financial planner....would like to see like 75% of the population go broke and basically be left with no money? I mean if the real estate market crashes big time chances are there are other things like stock market crashes, money market crashes, and commodity market crashes that drive it. In short if the real estate market does crash so hard.....chances are everyone is going to be screwed one way or another.

Everyone but me since I have no assets!

[jolinar of malkshor]

Originally Posted by FireFly

Everyone but me since I have no assets!

And me....all I have are student loans and a recession proof job.

[Tron_fdc]

Originally Posted by Sylvanfan

So you being a financial planner....would like to see like 75% of the population go broke and basically be left with no money? I mean if the real estate market crashes big time chances are there are other things like stock market crashes, money market crashes, and commodity market crashes that drive it. In short if the real estate market does crash so hard.....chances are everyone is going to be screwed one way or another.

Not exactly. Whenever you see a massive crash, smart investors don't get caught up in the hype and see it as an opportunity. If it crashes, there's huuuuge opportunity to make some serious money.

Imagine of the price of housing dropped 50%.....I'd mortgage myself to the nuts, buy as much property as I could, and when the market corrected itself (which it invariably would) you could turn around and make massive gains. Imagine if you could have afforded 4 houses back in the 80's when it dropped during the NEP; if you still had those properties you would be a multi millionaire. Another scenario was 9/11. The US was on the brink of recession, and the terrorist attack was more or less the straw that broke the camels back. There was a price dip in real estate, and I know a number of people that leveraged themselves as far as they could, and are now multi millionaires.

There's a lot of money to be made when people panic.....

[Vulcan]

Originally Posted by Tron_fdc

Not exactly. Whenever you see a massive crash, smart investors don't get caught up in the hype and see it as an opportunity. If it crashes, there's huuuuge opportunity to make some serious money.

Imagine of the price of housing dropped 50%.....I'd mortgage myself to the nuts, buy as much property as I could, and when the market corrected itself (which it invariably would) you could turn around and make massive gains. Imagine if you could have afforded 4 houses back in the 80's when it dropped during the NEP; if you still had those properties you would be a multi millionaire. Another scenario was 9/11. The US was on the brink of recession, and the terrorist attack was more or less the straw that broke the camels back. There was a price dip in real estate, and I know a number of people that leveraged themselves as far as they could, and are now multi millionaires.

There's a lot of money to be made when people panic.....

Good plan but if you've lost your job [Which caused the market free fall], it's kind of tough to leverage your assets. I could have taken over mortgages for a dollar but finding renters to pay the price of the mortgage would be impossible. Some people formed numbered companies, bought these houses and rented them out at a discount until the bank repossessed .
Bottom line is if you have cash, a steady income, credit and assets or an angle, you can make money.

[photon]

Originally Posted by RougeUnderoos

That's what I'm kind of wondering myself. The big boom was fuelled by, well, fuel I guess. People still need that fuel, far as I can tell.

I'm no econonomist but I can't see "freefall" in Calgary while so much money is pouring in. I don't think it works that way.

There's over $180 BILLION of projects on the books (not speculated, actual approved or in the ground stuff) for Alberta over the next while. There's no possible way they can complete them all in the time they'd like to since even at this pace we can't get enough people to live here, so they'll all be dragged out even longer.. Some economists were forcasting a strong growth until 2013, but have now changed to even longer. Unconventional oil will be in greater and greater demand, and here's a huge source of it in a politically stable environment (thanks Chavez!)

There'll be ups and downs, there'll be strong areas and some areas which don't do well, but with all that going on it's difficult not to think Alberta's still a good play. A sure thing? Of course not, nothing is. The government could shut the oilsands down totally. Oil could drop. Be aware of the risks and decide if it's worth taking them.

[FlamesKickAss]

Originally Posted by jolinar of malkshor

And me....all I have are student loans and a recession proof job.

me too!!

[Red]

Everyone is saying that the real estate boom happened due to the oil prices, but has anyone actually looked at that closer? The future projects are there and lots of them, but are we expecting an influx of new people moving here to do them (does everyone new here work in O&G industry?) or is the current workforce it? How many more people are working in Oil now than say 3 years ago, prior to the craziness?

Here are the Oil prices from the past 20 years. I bought my first house in 1996, which was a sad real estate time and I was a subject to a lot of cryticizm for buying in a "bad" time. But as were all of 90's, things didn't start to pick up until 1998 or so which ironically had 2 decade lowest oil prices. Oil prices for most part of the 90s were solid though....

Damn formatting.....here's the link http://www.inflationdata.com/inflati...ices_Table.asp

[OracleOfCalgary]

$180 bil worth of projects... how much of the engineering and how much of the labour will be offshored? How many jobs will actually be created in Calgary? I actually know someone who does engineering for these sorts of projects. He has left the city. Found better work elsewhere.

[photon]

The economic outlook is based on if one engineer moves out of the city?

Other provinces announce a 100 million dollar project and it's front page news for the province, a 1 billion dollar project and the premier gets a statue. Here we have billion dollar projects announced weekly it seems.

Sure there'll be tons of jobs that are done elsewhere, and there will be tons that are created here.

Last year 1/3 of the jobs in Canada were created by Alberta.. we only have 10% of the population. And look at where those jobs were created, across many sectors, not just natural resources and construction.

That's 86,000 new jobs in Alberta in 2006. People are coming here to fill those jobs. Why else would real estate prices across the province go up, because of the nice weather?

I sat and listened to a presentation by the chief economist of the province. He's retiring and this is his last budget, but he's done a pretty darn good job the past while. http://www.finance.gov.ab.ca/publica...lberta_created

I'm an investor, I WANT to know if things are going to go south.. but I need actual real numbers, not some report of one guy moving out of Calgary.

[Incinerator]

Originally Posted by photon

I'm an investor, I WANT to know if things are going to go south.. but I need actual real numbers, not some report of one guy moving out of Calgary.

Even for those who're not very good with real numbers (), a sure sign of things going south is when the help wanted signs start to disappear at the malls and Timmy Ho's in this town.

[OracleOfCalgary]

Look, things are good in Alberta, and if it weren't for the speculative bubble, I would have expected a long and gradual increase in prices over the long term. The RE bubble, however, has ruined all that and I think may damage the larger economy as a whole. $70 oil and $180 billion projects have become a rationalization for the high prices rather than the actual reason.

30 day trailing average price is down another $2K since yesterday. Median is down $1K.

[Red]

Originally Posted by photon

The economic outlook is based on if one engineer moves out of the city?

Other provinces announce a 100 million dollar project and it's front page news for the province, a 1 billion dollar project and the premier gets a statue. Here we have billion dollar projects announced weekly it seems.

Sure there'll be tons of jobs that are done elsewhere, and there will be tons that are created here.

Last year 1/3 of the jobs in Canada were created by Alberta.. we only have 10% of the population. And look at where those jobs were created, across many sectors, not just natural resources and construction.

That's 86,000 new jobs in Alberta in 2006. People are coming here to fill those jobs. Why else would real estate prices across the province go up, because of the nice weather?

I sat and listened to a presentation by the chief economist of the province. He's retiring and this is his last budget, but he's done a pretty darn good job the past while. http://www.finance.gov.ab.ca/publica...lberta_created

I'm an investor, I WANT to know if things are going to go south.. but I need actual real numbers, not some report of one guy moving out of Calgary.

But real estate didn't go bizerk only in Alberta, and I mean bizerk, not your regular growth like we've seen in the past.

I think construction labour shortage had a lot to do with it too. The builders kept asking more and more money to slow down the demand which they couldn't keep up and the pre-owned homes followed. Now it seems that most of the construction backlog is catching up, how long before we see tons of new homes looking for buyers? And then the price reductions etc.....

Just speculations on my part.