Real estate in Calgary - another bubble?

[blankall]

Originally Posted by DoubleF

Ownership isn't as big of an issue as unrealistic expectations.

I grew up in a 900 sq ft bungalow. My family was a family of 4. Nowadays, many young families are complaining a relatively new 1600 sq ft bi level is too small and cramped for a family of 3. Many think living in a 600-700 sq ft condo with a baby is impossible, even though millions, maybe even billions of people do this world wide with 3+ people.

What is considered "entry level" and "average" has significantly soared to insane heights in the last 20 years.

Hmmm...I don't know if I agree with this. It's a fact that Millennials can expect to have a lower standard of living than their boomer parents.

You do have a point in that expectations have changed from what people expected in different time periods and other countries. However, I wouldn't look to what boomers received from 1970-2005 or so as "tough" compared to now. You'd have to go farther back to find those comparisons. I don't think this generation will see the meteoritic rise in personal wealth that the previous one experienced, merely from owning a home.

Life is definitely easier in some ways. The cost of goods, generally, is cheaper. Largely because people are importing them from China now, which creates its own slew of problems. For example, everyone has a smart phone and no one is making payments on their blender.

[blankall]

Originally Posted by CliffFletcher

This is clearly a major social inequality issue, whether or not it’s recognized as such. We’ve all seen that illustration of two kids trying to look over a fence and one is standing on a step and the other isn’t. Well a $150k contribution towards a house is a bigger step than anything to do with race or gender.

With automation and the gig economy eating away at the income tax base, governments are going to be looking for new sources of revenue. Intergenerational wealth transfers are an obvious target. And I expect a lot of people who make all the right noises about other injustices will quietly go about doing everything in their power to evade that instrument of addressing inequality.

I would say inheritance and closely held corporations are the two biggest vehicles leading to inequality right now. Their effects are more profound than many of the traditional issues people complain of. I'm not trying to downplay issues with race, gender, etc...The generational monetary transfer is very much tied to such issues. People benefiting from multiple generations of prosperity are going to see a major windfall when their parents' transfer of wealth. This will undo all progress made elsewhere. The scale of this transfer is unprecedented.

[flamesfever]

nm

[Twitchy15]

Originally Posted by Leondros

There are over 240 listings in the Calgary area for detached houses for under $400K. If that's not affordable I think you need to temper your expectations.

That's a $20K down payment and $1,300 per month in mortgage payments. Based on the affordability calculator that's roughly a household income of $50 - 60K to support that or $30K per person.

exactly we were approved for like 600-620k but being realistic and running the numbers and not wanting to be house poor we ended up buying a house for 380k. It is far from perfect or big and we may move one day but there is plenty of detached affordable houses. But most people want brand new or very renovated for there first home of course! we did too but we settled for closer location to the inner part of the city and a old home.

[bizaro86]

Originally Posted by Leondros

There are over 240 listings in the Calgary area for detached houses for under $400K. If that's not affordable I think you need to temper your expectations.

That's a $20K down payment and $1,300 per month in mortgage payments. Based on the affordability calculator that's roughly a household income of $50 - 60K to support that or $30K per person.

30k per person is only $15/hour for 2000 hours per year. So while it would be tight, a two income family where both partners earned minimum wage could buy a detached house if they saved hard. Not saying it would be easy, but those numbers are something. Amazing how low rates improve affordability.

That doesn't seem like an unsustainable bubble to me.

Compare that to Peter12's thread about how two professionals with good incomes might be able to swing a 2 Br condo as an upgrade and Calgary RE looks pretty good.

[MillerTime GFG]

Originally Posted by Leondros

There are over 240 listings in the Calgary area for detached houses for under $400K. If that's not affordable I think you need to temper your expectations.

That's a $20K down payment and $1,300 per month in mortgage payments. Based on the affordability calculator that's roughly a household income of $50 - 60K to support that or $30K per person.

You have to take into consideration that most people earning 60k/year have debt, so you don’t typically see that income level affording a 400k house.

Edit: also, I don’t think your numbers are correct. Need to use a rate of 4.79%, and include estimates for heat and property tax, so likely around $300/month.

[Leondros]

Originally Posted by MillerTime GFG

You have to take into consideration that most people earning 60k/year have debt, so you don’t typically see that income level affording a 400k house.

Edit: also, I don’t think your numbers are correct. Need to use a rate of 4.79%, and include estimates for heat and property tax, so likely around $300/month.

I think the assumption people have debt is pretty irrelevant to the affordability considerations as an apples to apples comparison city to city would be the same.

My analysis was pretty high level but did include living costs of roughly $1,000 per month. I am not saying it would be a comfortable lifestyle but who's lifestyle is comfortable at minimum wage anyhow?

As for the percentage sure you need to use that for the stress test but I was talking about actual dollars. There are homes in the $300 - $350K range in Calgary if you really want to start splitting hairs...

[Mayo]

Originally Posted by Leondros

I think the assumption people have debt is pretty irrelevant to the affordability considerations as an apples to apples comparison city to city would be the same.

My analysis was pretty high level but did include living costs of roughly $1,000 per month. I am not saying it would be a comfortable lifestyle but who's lifestyle is comfortable at minimum wage anyhow?

As for the percentage sure you need to use that for the stress test but I was talking about actual dollars. There are homes in the $300 - $350K range in Calgary if you really want to start splitting hairs...

Also have to define comfortable.

Is comfortable having the money to afford a roof, utilities and have a picnic in the park with your family on Sunday?

Seems like most people think comfortable is a $1,300 iPhone.

[The Yen Man]

You can live in a suburb condo starting to $175K. I get everyone wants to start at detached home right away, or live in a fancy inner city condo, but if you're making $60K as a 20 something you can still afford to buy a place. ~$200K is pretty do-able IMO with current wages in Calgary.

[MillerTime GFG]

Originally Posted by Leondros

I think the assumption people have debt is pretty irrelevant to the affordability considerations as an apples to apples comparison city to city would be the same.

I understand what you're saying to an extent, but it's hard to call debt irrelevant given how high household debts are in Alberta/cross-Canada.

[Leondros]

Originally Posted by MillerTime GFG

I understand what you're saying to an extent, but it's hard to call debt irrelevant given how high household debts are in Alberta/cross-Canada.

No irrelevant but debt servicing comes into the equation. Someone with net assets of $50k can only get so much debt.

[boogerz]

Originally Posted by The Yen Man

You can live in a suburb condo starting to $175K. I get everyone wants to start at detached home right away, or live in a fancy inner city condo, but if you're making $60K as a 20 something you can still afford to buy a place. ~$200K is pretty do-able IMO with current wages in Calgary.

A $175k mortgage on a condo is do-able...but for that money you're only getting one bedroom, you'll have to deal with the terrible condo board, and the condo fees are $500/month.

The condo fees push that mortgage payment into the monthly payment range of a small starter SFH, which has more space and no condo board.

The small extra stretch for a SFH is a no brainer.

[bizaro86]

Originally Posted by boogerz

A $175k mortgage on a condo is do-able...but for that money you're only getting one bedroom, you'll have to deal with the terrible condo board, and the condo fees are $500/month.

The condo fees push that mortgage payment into the monthly payment range of a small starter SFH, which has more space and no condo board.

The small extra stretch for a SFH is a no brainer.

There are 70 condos listed in Calgary with an asking price of 175k or less that have 2 bedrooms. And a 175k mortgage is a purchase price higher than that, plus negotiating room.

[The Yen Man]

Originally Posted by boogerz

A $175k mortgage on a condo is do-able...but for that money you're only getting one bedroom, you'll have to deal with the terrible condo board, and the condo fees are $500/month.

The condo fees push that mortgage payment into the monthly payment range of a small starter SFH, which has more space and no condo board.

The small extra stretch for a SFH is a no brainer.

There is no way a suburban 1 bedroom condo in Nolan Hill has a $500 condo fee. I have one in a beltline highrise that charges $300.

[bizaro86]

Originally Posted by The Yen Man

There is no way a suburban 1 bedroom condo in Nolan Hill has a $500 condo fee. I have one in a beltline highrise that charges $300.

How about a renovated inner city SW 2 bedroom with $385 condo fees for $175k. I don't know the listing so can't comment on the condo board, but otherwise both of those objections to condos aren't real, imo.

https://www.realtor.ca/real-estate/2...-south-calgary

[Hemi-Cuda]

Originally Posted by The Yen Man

You can live in a suburb condo starting to $175K. I get everyone wants to start at detached home right away, or live in a fancy inner city condo, but if you're making $60K as a 20 something you can still afford to buy a place. ~$200K is pretty do-able IMO with current wages in Calgary.

Except condos are a terrible purchase and could cause you to be tied down if you ever want to move up. You're better off renting

[Rutuu]

I've been checking in and out of this thread for a bit. On my snooping I haven't seen to many folks break the purchase of a detached property into land value and home value. Land typically goes up in a growing city, the house itself is a bit of a depreciating asset that needs maintenance and renovation over time. My buddy in Houston was the same way when he was purchasing his latest place...it was all about the total price, not about maximizing land size.

On the condo side. The best real estate guys I follow talk about the cost of supply. If they can build it cheaper than you bought it for, then you're in trouble. If you bought it cheaper than the rebuild costs, you're in the clear for a capital return.

Anyway...property chats are always great fun.

[peter12]

Originally Posted by bizaro86

How about a renovated inner city SW 2 bedroom with $385 condo fees for $175k. I don't know the listing so can't comment on the condo board, but otherwise both of those objections to condos aren't real, imo.

https://www.realtor.ca/real-estate/2...-south-calgary

Hahaha that’s a $700,000 condo in Vancouver. FML.

[burn_this_city]

Originally Posted by peter12

Hahaha that’s a $700,000 condo in Vancouver. FML.

Have you ever considered living inside a super car. If that's 700k, I'd rather be in a Ferrari down by the river.

[bizaro86]

It's amazing how much the trailing returns affect people's perception of what the right course of action is.

Exhibit A: The Vancouver perspective. After years of going straight up, Vancouver RE is now very, very expensive. But that's meant that buying ANYTHING has been the right choice.

Originally Posted by Winsor_Pilates

<snip>
They would have been way better off getting something (condo or townhouse) when they had 150k down, gaining market equity, not paying rent and then upsizing once they saved more + using the gained equity.

Waiting and saving in Vancouver has proven to hurt people as you're chasing a moving target that goes up faster than people can save.
This is why it's not very common.

Exhibit B: The Calgary perspective. Condos are down over the last 10 year period. But they're so cheap now that it's really, really unlikely (imo!) that they will repeat anything close to that performance over the next 10 years.

Originally Posted by Hemi-Cuda

Except condos are a terrible purchase and could cause you to be tied down if you ever want to move up. You're better off renting

Not meant to be a dig at either poster - they're both 100% correct for a certain set of circumstances.

I just think over the next 10 years the right choice might be opposite for the two geographies. Renting a Vancouver condo is so much cheaper than owning at this point that I don't see how the difference ever gets made up. The appreciation required to just break even would be huge.

Whereas owning a Calgary condo is very cheap relative to rent. Even if values stay flat (at current low prices) you're going to make out OK just from mortgage paydown. And with oil prices finally recovering and the Transmountain expansion getting built, I think there's the potential for upside. It doesn't need to be an old style 40% in one year boom, but a couple of 5%+ years in a row on a condo is a pretty nice shortcut on saving for a detached house if that's the end goal.

YMMV, not advice.