Calgary Real Estate Bubble?

[I-Hate-Hulse]

Originally Posted by firebug

I also have a couple excel charts prepared, but don't know how to post them.

A quick and dirty way might be to screen capture the chart, host the image somewhere, and then link the image in a post. PM me if you need a hand.

[Tron_fdc]

Originally Posted by MacDougalbry

Yes, but oil has been up there for a while now. What happened starting last August to drive housing prices up by 43% year over year? Also , a collapse of the housing market in the states is sure to bring on a fairly painful recession down there; which will definitely impact the price of oil in some way.

The US is not the only country with massive oil demands. Unless we see a global recession, having a slowdown in the US might have a short term impact on global prices but longterm it should stabilize(IMO). Although I don't have figures in front of me, China alone is probably at par with the US (or will be shortly) as far as demand goes, and when you add that to India's requirements the US is far from the only place we can send our resources. The US is the most convenient place for us to do business, but if the market dried up there would be countries literally lining up to set up in Alberta. 10-15 years ago I might be worried about it, but not now.

I agree with what you're saying about leveraging your home equity though.....it works great in a hot market but if that market goes south get ready for a lot of bankruptcies. I wonder how much money is floating around because of all the HELOC's that were utilized to buy new boats, cars, cottages, businesses, etc etc? Even a slight downturn in housing prices could cause problems that could cause ripple effects throughout the province......

Thinking out loud here, but it's possible, no?

[Looger]

calgary's real estate is being pushed by actual economics, unlke vancouver's real estate which was bouyed by the 'fact' that china was going to close off hong kong and make it like the rest of china.

in 1997 china left hong kong's economic system largely alone, and the money pouring into vancouver in fear of china's crackdown slowed to a crawl overnight.

that's why prices fell like a rock in 1997 / 1998, down to merely ridiculous. vancouver for the most part is still sandwiched between the ocean and the mountains, so it's still expensive.

calgary's boom is not based on a house of cards. it's based on what's going on in calgary, not what's NOT going on in hong kong.

[ken0042]

Originally Posted by Tron_fdc

I wonder how much money is floating around because of all the HELOC's that were utilized to buy new boats, cars, cottages, businesses, etc etc? Even a slight downturn in housing prices could cause problems that could cause ripple effects throughout the province......

Thinking out loud here, but it's possible, no?

A cottage or business isn't so bad, but I've heard of "friend of a friend"s (so take it for what it's worth) who use the HELOC to buy that $60K SUV.

Your $100K cottage will still be worth a significant percentage of it's value if property goes down. But the SUV loses so much money every year.

The other thing that could happen is interest rates hit 8%. That would put my payment up $200 which would impact the entertainment fund. But somebody who is just barely making payments could also lose their house.

[I-Hate-Hulse]

Originally Posted by MacDougalbry

I agree... unless, of course, you have taken out a HELOC's (Home Equity Line of Credity), which have become an extremely popular way for people to tap into their new found "wealth". A lot of people are living high off of these paper gains.

I haven't looked closely at a HELOC contract - if the value of your home drops, does that trigger an immediate cash call from the bank for borrowed amounts in excess of the value of your place?

[photon]

I don't believe so, the LoC is still secured against the house. Just as if your mortgage was a 5% mortgage and house values went down 10% it wouldn't mean the bank would forclose on the mortgage.

If the market went down 15% the bank would have to do cash calls and forclose on everyone, but then they'd be left with tons of houses to liquidate and no one to buy them.

The last thing a bank wants to do is to have to deal with that kind of thing.

[photon]

Originally Posted by MacDougalbry

I agree... unless, of course, you have taken out a HELOC's (Home Equity Line of Credity), which have become an extremely popular way for people to tap into their new found "wealth". A lot of people are living high off of these paper gains.

Yes, but oil has been up there for a while now. What happened starting last August to drive housing prices up by 43% year over year? Also , a collapse of the housing market in the states is sure to bring on a fairly painful recession down there; which will definitely impact the price of oil in some way.

I haven't met anyone who's done that (purchased liabilities with money borrowed against their house's equity), but I'm sure they're out there. And that's their problem, it just means cheaper homes for me to buy when they get forclosed There's always stupid people.

The price of oil isn't just the US, China's a huge factor there as well.. and even then Alberta's economy isn't just oil. The huge jump in the last few months is due more to constrained supply, and the size of the jump is enabled by high affordability compared to the rest of Canada, high wages, and people moving here.

[MacDougalbry]

Originally Posted by photon

The price of oil isn't just the US, China's a huge factor there as well.. and even then Alberta's economy isn't just oil. The huge jump in the last few months is due more to constrained supply, and the size of the jump is enabled by high affordability compared to the rest of Canada, high wages, and people moving here.

The Chinese economy is a whole other can of worms... frankly, I am suspicious of government-engineered capitalism.

I totally agree that Calgary has the fundamentals to justify a strong Real Estate market... I'm just not sure that explains the whole 40% year over year gain; and then there is also the whole coincidence that this comes on the heals of a "bubble market" in real estate worldwide. Having said that, I personally don't expect prices to come down any time soon. Vancouver, on the other hand, I'm not so sure about... (some weird stuff going on there, e.g. the whole "W" building going up on skid row, etc...)

[photon]

I totally agree with Vancouver, affordability is very low there and their wages increases aren't very good.

For Calgary as to why 40%? Hard to say, other than real estate was way below other major centres and combine that with a huge influx and constrained supplies and prices quickly rise. But I wouldn't bet the bank on another 40%. The best way to invest in real estate isn't really buy and flip anyway (unless you are doing something to add value such as renovate, subdivide, rezone, whatever).

EDIT: Ooops, amazing what a missed "n't" will do

[Claeren]

Originally Posted by photon

I totally agree with Vancouver, affordability is very low there and their wages increases aren't very good.

For Calgary as to why 40%? Hard to say, other than real estate was way below other major centres and combine that with a huge influx and constrained supplies and prices quickly rise. But I would bet the bank on another 40%. The best way to invest in real estate isn't really buy and flip anyway (unless you are doing something to add value such as renovate, subdivide, rezone, whatever).

So essentially you are willing to "bet the bank" that Calgary will have one of the highest average home price levels in the world within a short period? Despite massive lands available for development in all area's of growth (downtown, industrial, commercial, suburban), an eventual build out of capital projects in the north, massive American deficits and debt that will need to be aligned, and rising interest rates?

I can't wait til you do because i am hording my dollars at this point and will be happy to pitch you one to assume your mortgage in 3 years....


Claeren.

[DementedReality]

Originally Posted by Claeren

I can't wait til you do because i am hording my dollars at this point and will be happy to pitch you one to assume your mortgage in 3 years....


Claeren.

so what are some strategies to hoard dollars? i have been using ING, but i always get the feeling i am short changing myself because its so safe, the return is quite small.

[photon]

Oops! That should read "wouldn't bet the bank on another 40%", which is why I said flipping isn't the best way. If we get another 40% runup over the next year (let alone next 4 months like we've had) I'll eat my hat.

EDIT: And I like the way you think Claeren, if rates go up significantly there's going to be a lot of people who overcomitted themselves on their house and will be selling, there will be deals to be had!

[White Doors]

America's debt to GDP ratio is still less than Canada's last I heard though.
No doubt that Canada is booming though.

[Bend it like Bourgeois]

Recently chatted with a friend who owns a home building business. 2 things I found incredible.

1 - he can't raise prices enough to slow demand. And he's trying.
2 - even if he wanted to build more, suppliers are scaling back accross the industry because there just arent enough trusses and concrete and etc etc to satisfy demand.

Demand stil far exceeds supply, and it's not catching up any time soon.

Still lots of room for growth in Calgary IMO.

Not 30% growth, but > 10% is not out of the question, and 6 - 7% is a lock.

[Claeren]

Originally Posted by White Doors

America's debt to GDP ratio is still less than Canada's last I heard though.
No doubt that Canada is booming though.

Wow, you must still be thinking of the golden Clinton years (I know you miss him!) - Where America was the pillar of world commerce.

Thanks to ol'Bushie by the time he leaves office America will have a debt-to-GDP ratio that is ~twice that of Canada's (Something like 40% v. 80%.)

America's yearly DEFICITS are now like 4% of GDP (or like 6% if you include all the 'emergency financing' needed each year for those ongoing mistake's on the other side of the earth before even talking about the ratio to accumulated debt!

(When you include provincial and state debt it is a much narrower race but then when you include outstanding liabilities like pensions and health care promises then Canada retakes the lead by a wide margin again.)

Of course America has only slipped in the past ~6 years or so. Before that it was Canada that was the laggart.

Claeren.

[White Doors]

I checked, you are correct in that Canada' GDP/debt ratio is now lower, but check this:


http://www.ntma.ie/NationalDebt/debtGDP.htm

The GDp of the USA is outpacing the growth of debt. Economists know this and that is why there is not a panic on the cost of war.

and by the way, the Debt/GDp ratio has improved markedly since Clinton left.

[Bobblehead]

Originally Posted by White Doors

and by the way, the Debt/GDp ratio has improved markedly since Clinton left.

You may want to check your chart again.

Clinton was took power in '92, and in '91 (Bush Sr's final year) the rate was 96%

Clinton's final year it was 48%. That's is pretty astounding- 48% drop. So it looks like your implied critcism on Clinton is misplaced.

EDIT: Hey - I just noticed that chart you linked is for IRELAND!

EDIT 2: If you look at this link you will see Debt v GDP has risen under Bush

[Bobblehead]

And if you look here, you see as of May '06, Canada's Debt v GDP is estimated to be 68.2%, the US is 64.7%

However, if you use NET International Debt vs GDP, the US is 47.2%, Canada is 21.7%. (Australia is -0.9%, Norway is -141% - The world owes Norway a lot of money!)

Interesting stats.

Edit: Fixed my link - I still had White Doors url in the clipboard.

[azzarish]

In England house prices steadily kept rising over the last 10 years, and there came a point where it was almost impossible for the averge family to buy a home unless they were generously aided by their parents or other family. What then happened was that because prices were so high, houses wouldn't sell, so the asking price had to come down.

Calgary house prices have not hit their peak yet by any means, it's only recently that there the boom has arrived, and I expect this continue for a good few years yet.

[Claeren]

Originally Posted by azzarish

In England house prices steadily kept rising over the last 10 years, and there came a point where it was almost impossible for the averge family to buy a home unless they were generously aided by their parents or other family. What then happened was that because prices were so high, houses wouldn't sell, so the asking price had to come down.

Calgary house prices have not hit their peak yet by any means, it's only recently that there the boom has arrived, and I expect this continue for a good few years yet.

Do you know how many people live (or take residence) in England/London? There are more filthy rich people in England then there are people in Calgary (and likely Alberta). Real Estate in a market like that is considered a great place to hide/place assets. There is just no way you can compare Calgary to England.

Claeren.