Calgary Real Estate predictions?

[V]

I just assumed everything was trucking along just fine because we haven't seen an update from chemgear in quite some time. I'm curious to see what the numbers look like.

[Suave]

Here are the numbers from chemgears usual source:

The spring market has started very positively with Calgary buyers out in force. Single family homes sales recorded a +17% increase from last March with a total of 1576. Year-over-year, the average price climbed +2.36% or $10,885 to $472,465. The median price increased +3.5% to $412,000.

Condo sales totaled 591 with an average price of $288,367 and a median of $265,000. That’s +1.9% increase in sales, +2.5% average price and +3.3% in the median price from last March.

http://calgaryrealestatereview.com/

[chemgear]

Yup, been a little busy to post as much but I don't think things have fundamentally changed much. Even at record low 2.99 rates things are still pretty tame - keeping in mind 2010/2011 being such relatively low sales numbers in spite of record low interest rates over the last decade.

Bank of Canada still screaming (as much as they can) about people piling on the household debt. I believe most of the major banks say there will be no "US style" correction but they continue to point out numbers of 5-15% (even BMO changed their tone now.)

Interestingly, inventory seems to be relatively low in Calgary, but pretty crazy high in places like Vancouver. Always neat to watch; but not going to lie, I've been more keen to follow Apple stock and numbers over the last year or two.

[chemgear]

Oh, and I've also been going through the "This American Life" archives since the Apple story retraction gongshow. There is a pretty good one about the Housing bubble if you're into radio shows. Interesting and entertaining:

http://www.thisamericanlife.org/radi...-pool-of-money

[Old Yeller]

Originally Posted by Realtor 1

And dont get me wrong, I am not wearing rose colored glasses.

I just think the title of that article is a bit strong.

I think you're right... especially since it says right in the article that 33% of all US mortgages were sub-prime at its highest point in 2006, where as only 5% in Canada are in that sort of category.

Hell most of the article seems to counter-act the title of the article.

[Red]

Originally Posted by Old Yeller

I think you're right... especially since it says right in the article that 33% of all US mortgages were sub-prime at its highest point in 2006, where as only 5% in Canada are in that sort of category.

Hell most of the article seems to counter-act the title of the article.

How do they define subprime?

Does it include the 2nd,3rd mortgages that flippers took on a 100K family income? Or the HELOCs? These people have incomes and are credit worthy, but are high risk.
Are cash back mortgages to people with average jobs and no savings included?

I think people have too much debt (mortgage and other) and once some trigger goes off things can unravel rather quickly.
Most of that debt was fuelled by house values going up during a bubble.

[red sky]

What is too much debt? Are people racking up debt that exceed a TDS ratio of 42%?

[photon]

Subprime referred to the borrower.

So these are people without jobs that got mortgages where the principle increased over time because the value of the house in 5 years justified it (or whatever story was used to justify lending to that person).

Does the person meet the 40% debt service ratio rule, if not they're a subprime borrower.

[TurnedTheCorner]

Originally Posted by TurnedTheCorner, April 11, 2011

I predict there will continue to be real estate changing hands in Calgary for the foreseeable future.

[Skyceman]

Originally Posted by Realtor 1

There was not a whole lot of "fact" in that article.
"Some similarities" , I can find some similarities between the flames and the best teams in the league.

I keep thinking YVR is due for a heavy correction but then you hear about condo buildings selling out at the blink of an eye.

I believe due to slower growth since the recession, Alberta is safer than most provinces and I think Canada is far from resembling the US housing crisis.
I have hands on experience with numerous people who make great income and still need to go through hurdles to get financing, ie self employed individuals.
While I had no hands on experience with the ease of financing in the US, I hear it was almost impossible to have a bank even question you.

I think you are kidding yourself if you think Alberta is immune. There was an article published earlier this year discussing the debt levels of those who bought in Alberta during the recent boom years:

"Families who chased the home ownership dream during Calgary's boom years are contributing to growing levels of household debt in the province as price gains have outstripped incomes.

The risky mix of cheap borrowing costs and weak growth in household real incomes has consumers "punch drunk" on debt, the report warns, with the debt-to-income ratios worst in Alberta, British Columbia and Ontario.

The "surge in real estate prices during the boom" that forced homebuyers - many of whom came from out of province - to take on relatively high rates of debt is the leading cause of Albertans' heavy debt load, said Benjamin Tal, deputy chief economist with CIBC.

"As well, a very high level of confidence during the boom led many to assume a larger debt load under the assumption that wages will continue to rise at the same rate."

http://www.calgaryherald.com/touch/b...tml?id=6059830

Once OSFI impliments much stiffer rules on banks, and takes the reigns over CMHC, you'll not likely see much change until then. Banks are trying to spark the markets with historically low rates but how long can that last? Easy credit has been the only real driving force behind the surge in real estate in the last decade.

"Balloon and not a bubble", this has been said for quite some time now and is how most markets work.

How MOST markets work? You mean like the U.K? A country that has had three bouts of rapid house-price inflation in the past 40 years, and all of them have been followed by painful busts.

Or Japan? A real estate bubble brought on by lax lending standards with rampant speculation pushing prices 6x higher only to burst - taking the economy and equity markets with it. Homes lost 80% in value and remained there for years.

I won't bring up the U.S market as it speaks for itself. A telling story of what happens when greed and emotion take over - borrowing beyond their means. Are Canadians any better? Obviously not - RRSP contributions are at record low levels while almost 7 in 10 Canadians own a home. No one is saving anymore, maxing out HELOC's to buy cottages, boats or renovating. On and on it goes. Buy hey "it's different here".

Then what about Australia? Both are big countries, small domestic economy, big reliance on natural resources and susceptible to volatile commodity prices. A correction has already started there. Last year, Melbourne prices dropped by almost 6%, Brisbane is off 7.5%. Last October alone, Perth prices sank at an annualized rate of 10%, and Brisbane crumbled 19%.

So MOST markets are balloons? What markets are you referring to?

[Travis Munroe]

Originally Posted by Skyceman

I think you are kidding yourself if you think Alberta is immune. There was an article published earlier this year discussing the debt levels of those who bought in Alberta during the recent boom years:

"Families who chased the home ownership dream during Calgary's boom years are contributing to growing levels of household debt in the province as price gains have outstripped incomes.

The risky mix of cheap borrowing costs and weak growth in household real incomes has consumers "punch drunk" on debt, the report warns, with the debt-to-income ratios worst in Alberta, British Columbia and Ontario.

The "surge in real estate prices during the boom" that forced homebuyers - many of whom came from out of province - to take on relatively high rates of debt is the leading cause of Albertans' heavy debt load, said Benjamin Tal, deputy chief economist with CIBC.

"As well, a very high level of confidence during the boom led many to assume a larger debt load under the assumption that wages will continue to rise at the same rate."

http://www.calgaryherald.com/touch/b...tml?id=6059830

Once OSFI impliments much stiffer rules on banks, and takes the reigns over CMHC, you'll not likely see much change until then. Banks are trying to spark the markets with historically low rates but how long can that last? Easy credit has been the only real driving force behind the surge in real estate in the last decade.



How MOST markets work? You mean like the U.K? A country that has had three bouts of rapid house-price inflation in the past 40 years, and all of them have been followed by painful busts.

Or Japan? A real estate bubble brought on by lax lending standards with rampant speculation pushing prices 6x higher only to burst - taking the economy and equity markets with it. Homes lost 80% in value and remained there for years.

I won't bring up the U.S market as it speaks for itself. A telling story of what happens when greed and emotion take over - borrowing beyond their means. Are Canadians any better? Obviously not - RRSP contributions are at record low levels while almost 7 in 10 Canadians own a home. No one is saving anymore, maxing out HELOC's to buy cottages, boats or renovating. On and on it goes. Buy hey "it's different here".

Then what about Australia? Both are big countries, small domestic economy, big reliance on natural resources and susceptible to volatile commodity prices. A correction has already started there. Last year, Melbourne prices dropped by almost 6%, Brisbane is off 7.5%. Last October alone, Perth prices sank at an annualized rate of 10%, and Brisbane crumbled 19%.

So MOST markets are balloons? What markets are you referring to?

I am referring to MOST markets across Canada, see the article you posted.

And I did not say Alberta was immune...that is a stretch from believing Alberta is safer from a correction than say BC

[freedogger]

Originally Posted by Realtor 1

There was not a whole lot of "fact" in that article.
"Some similarities" , I can find some similarities between the flames and the best teams in the league.
"Balloon and not a bubble", this has been said for quite some time now and is how most markets work.

I keep thinking YVR is due for a heavy correction but then you hear about condo buildings selling out at the blink of an eye.

I believe due to slower growth since the recession, Alberta is safer than most provinces and I think Canada is far from resembling the US housing crisis.
I have hands on experience with numerous people who make great income and still need to go through hurdles to get financing, ie self employed individuals.
While I had no hands on experience with the ease of financing in the US, I hear it was almost impossible to have a bank even question you.

I have been following these areas with interest the past few years and agree with every point you just made. Only thing I would add is that high oil prices have potential to crater the world economy, take oil prices back down and cause a temporary lull in Calgary real estate. I say temporary because I think we are at peak oil and this will make it harder and harder for oil to stay down for any significant duration. Gas will eventually rise once kitimat opens up our land locked supply to world markets.

[Bill Bumface]

Everyone thinks their own market is special:

Vancouver: "No more land"
Toronto: "Tons of immigration"
Calgary: "Oil"

I don't think anyone ever thinks where they live could possibly face a bust. All I know is most of the equity in my house is fake, brought on by a crazy price increase on the last place I sold. As long as I don't lose the amount I put in at the very beginning as cash I had worked hard to save for, I'll never complain about price corrections.

[chemgear]

It's interesting to watch how sentiment from banks, BOC, newpapers, and people in general seems to have shifted (or in some combination) from:

- BS, there is no bubble moron, we are way more responsible!
- The fundamentals don't matter anymore, there has been a paradigm shift
- Meh, maybe some places in Canada are a little higher than they should be
- We're not like (insert location), we have (limited land, resources, jobs, money, immigrants, etc.) - everybody wants live here.
- Who cares if household debt is higher than the US or Greece, interest rates aren't going up any time soon.
- Oh yeah, Vancouver and Toronto are going to get hit, but we have natural gas and oil - we will be unaffected
- Don't mind natural gas prices, we still have oil prices


Always interesting to watch the numbers, who knows how it will all pan out in the long run.

[kevman]

This thread simply doesn't have the gusto it once did...

I don't want to play the "it's different here" card but just for fun here's and over simplified view on it.

Still waiting on the latest census results but Calgary average family incomes is now ~$100,000/year.
$100,000/year will get you a mortgage of just shy of $400,000 @ 7% over 25 years.
Average house prices are now $470,000.
Assuming ZERO down payment the average family is only $70,000 short of buying the average Calgary house.

Now if interest rates go up to 15% again...

[Red]

Originally Posted by kevman

This thread simply doesn't have the gusto it once did...

I don't want to play the "it's different here" card but just for fun here's and over simplified view on it.

Still waiting on the latest census results but Calgary average family incomes is now ~$100,000/year.
$100,000/year will get you a mortgage of just shy of $400,000 @ 7% over 25 years.
Average house prices are now $470,000.
Assuming ZERO down payment the average family is only $70,000 short of buying the average Calgary house.

Now if interest rates go up to 15% again...

But you just did

If there is that much money here, why have houses been falling in Cgy and Edm? What's the reason? And that's during the absolute lowest mortgage rates.

[Cowboy89]

Originally Posted by Red

But you just did

If there is that much money here, why have houses been falling in Cgy and Edm? What's the reason? And that's during the absolute lowest mortgage rates.

I'm willing to bet that despite the fundamentals being hypothetically within reach of the hypothetical average family. There's probably still a hangover effect from the boom where there's legions of people underwater with no options to move without cutting a large cheque, much like another thread posted today. It's going to get worse when OSFI will change the rules and forbid mortgage renewals at a principal price above market value by the end of the year. This will force people underwater to fish or cut bait.

[kevman]

Originally Posted by Red

But you just did

If there is that much money here, why have houses been falling in Cgy and Edm? What's the reason? And that's during the absolute lowest mortgage rates.

I guess I did!

After 5 years of a relatively stagnant market wages are slowly catching up to house prices. *yawn* I guess I just wanted to see a little more excitement! 5% drop in 5 years in nothing.

[COGENT]

nm

[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.