Am I CRAZY to be building a new home in Calgary?

[AFireInside]

Originally Posted by Claeren

There is a real estate thread already with tons of info.
http://forum.calgarypuck.com/showthr...=52710&page=25


Real Estate is going to continue to PLUNGE in Calgary and Canada and the world over the next 2 years and into the future beyond that. I would guess another 15% drop to start but could easily see scenarios where prices drop 30%. (Just read a report out of the USA that homes prices could easily drop ANOTHER 20% next year, taking them roughly 50% off of peak.)

Whatever you do I would be very careful and would be cautious as to whose advice I sought -- people with a vested interest like Real Estate Agents or Home Builders are the WORST people to listen too yet are at the top of a lot of peoples list when seeking advice, which is brutal. (And also explains the mindless logic behind the bubble we just saw in the world real estate market.)

The people waiting for the 'spring bump' are going to get even more thrashed this coming year than last.

The hilarious part is how rents are now finally starting to plunge. You can get fantastic brand new highend 2-bedroom condos downtown that were priced $600,000+ at the peak for $1595/month ALL inclusive right now! (I have seen people offering stereos, plasma TVs, free internet, etc on top of that!) The mortgage + carrying costs on that unit would be many times that, the condo fees alone are likely $400-$600/month.

Likewise, you can get fantastic never lived in homes for $1400/month in areas like you want to live. Why not rent and save $1000/month (or much more?) right into your savings and not lose equity all the way down as the market collapses?

Assuming you could sell your house for a fraction of the price you think you can....



Claeren.

This is a great post. Especially on whose advice you get. I told my realtor last February that prices were going down, and she insisted they weren't. I do kind of work in the industry but I am not involved in selling properties that's for sure. At this point, cautious is the way to go. Keep a real close eye on the market, you'll be able to see the trends. Some people are going to get hosed in the coming year.

I also agree with what Claeren stated above that those waiting for the spring bump are likely in for a rude awakening. As I stated in an earlier post, the inventory on houses is growing. Listings to sales are anywhere from 2:1 to 4:1 on any given day. Those waiting to list in the spring are just going to join an increasing inventory. Using common sense its easy to see that prices are going to drop quite a bit. There is going to be a lot of people who are desparate/need to sell, and there will be a ton of competition which means lower prices.

You never can fully predict 100% what will happen in the market, but using common sense and doing a little research, this appears to be the most likely scenario.

I personally have not seen any information that suggests that housing prices will increase or stabalize this year. None. Zero. Just those who want prices to continue to increase stating that things will pick up in the spring/summer, which is exactly what I heard last year. The only thing that picked up were the number of listings. Should be noted that was also in a decent economy.

[metal_geek]

I just sold my house in calgary and I can tell you whatever you think your house is worth take 15% minimum off it and start there. I was lucky and had lots of equity to play with but I had to take 20k less for my house then I paid for it 2 years ago. Some people asked me why I did that... take a loss. I told them it was because when people realise where the market is, there will be a very large drop in prices and I just priced my house there today and had the best deal in the city. 4 months from now the same price I sold for today will be where everyone else is and I'd have to drop it even more to sell it.

My unqualified opinion is that your house will not be worth what it was yesterday for a bare minimum of 3 years, and that is assuming everything financially follows the best possible path. If ANYTHING at all major goes wrong, with layoffs/foreclosures, it may be decades before your house is worth what it was yesterday.

We have yet to see the housing market "crash" in a dramatic fashion like the US, however, canada is just starting the job losses that triggered the collapes in the US.. I contend that 4 months after the job losses in the US, was the start of the whole collapse. This month were the first job losses in Canada and they were severe.. April in Canada will be a bloodbath when the realization of whats happening sets in...

In my opinion... Sell your house today, take a loss on it, put your cash in the bank and rent untill you are ready to buy. You are losing about 6-8K of the equity in your house monthly. Renting will actually SAVE you alot of money and alot of stress. If you are planning on selling your house in the next 3 years.. there is no better time then TODAY...

There are SOOOOO many signs of where this thing is going, buying a house today would be crazy.... Of course I could be on crack, but I bet my house on it, literally

[Nabber]

Originally Posted by AFireInside

the inventory on houses is growing.

Well actually the inventory has dropped more than 4,000 since May this year from 13,900 (way to high for Calgary) to 9,777 at the current time, as a lot of people have given up trying to sell by either taken their place off the market or renting them out. Incinerator makes great points when trying to sell your place, as currently it is a tough market to sell, but there's lots out there when buying.

That said, I agree with most of what everyone else said, sell your place first, as there's to much stress in building a place then not being able to sell your current house before you move into your new one. I know it sucks to move twice but I think in this case it's worth it. The way the market was previously you could get away with that, as most homes were guaranteed to sell but with the worldwide economic uncertainty you have to be more cautious. Now is a great time to upgrade as you should save more money upgrading, but as well Hulse is right if prices drop you lose more on the more expensive house. It's all a gamble and if you're able to afford the newer place without stressing about losing your job then go for it, if prices do drop well you're still locked in at a payment you can afford. If at a minimum prices remain stable the you picked a good time to do it.

[bradster57]

Originally Posted by Claeren

The hilarious part is how rents are now finally starting to plunge. You can get fantastic brand new highend 2-bedroom condos downtown that were priced $600,000+ at the peak for $1595/month ALL inclusive right now! (I have seen people offering stereos, plasma TVs, free internet, etc on top of that!) The mortgage + carrying costs on that unit would be many times that, the condo fees alone are likely $400-$600/month.

Claeren.

Today's paper said rental prices rose 4.7% rather than plunged.

http://calsun.canoe.ca/Business/2008...39436-sun.html

[Jason14h]

Today's paper said rental prices rose 4.7% rather than plunged.

That is a totally contrieved stat.

It's similar to the average selling price "only" dropping a few percentage points. What it fails to mention is no one is buying the super cheap units anymore, so the average price may stay relatively static, but the quality of that "average" price home could be much higher.

Its the same with rentals. If no one was renting higher end units (Because they were just flipping them) the average will be lower, then if all the higher end units are now being rented out.

[AFireInside]

Originally Posted by Nabber

Well actually the inventory has dropped more than 4,000 since May this year from 13,900 (way to high for Calgary) to 9,777 at the current time,

Inventory is growing in the sense that listings have exceeded sales by a large margin everyday for the past six months or so. There is a dip in inventory every year at this time. However for the past several years there have been sales to go along with those listings. Inventory may have decreased, but sales have decreased more, and if you compare the number currently listed to how many were listed in the past couple years at this time it is a lot higher. This of course is going to lead to an very large inventory in spring leading into summer.

[smithtofuhr86]

What are you thoughts about the City Tax assessments as far as determining how much your house is worth? How much lower than the City should a person be selling there home for, for example the City assessed our home at about $377,500 in today's market there is no way we are getting that so what's the general rule of thumb in today's market would you go $20000, $30000, $40000?? below what the City has assessed the home?

[I-Hate-Hulse]

I'd pay precisely zero attention to City Tax Assessment values in determining what your house is worth. When the market was good, people thought they were out of whack and now that market is bad - guess what they still think it's bad.

I believe assessment values are done point in time based on like sales in your immediate area - as of July? Problem is, that was then - this is now. Pricing of houses that sold last MONTH aren't even valid anymore let alone some done 6-8 months ago. See what's sold in your area recently and go DOWN from there.

Bottom line - I'd put very little value into your City assessed value in determining what your house is worth.

[metal_geek]

with regards to tax assessment, i sold our place for 70k less then the citys assessment in june.

[Claeren]

"We will never see these prices again in our lifetime, when you adjust for inflation," says Peter Schiff, president of investment firm Euro Pacific Capital of Darien, Conn. "These were lifetime peaks."

http://www.usatoday.com/money/econom...?se=yahoorefer



^Might be a bit over the top for younger people like Cpucks average crowd, but the point is the same -- new highs are a long ways off.




Claeren.

[AFireInside]

Originally Posted by metal_geek

with regards to tax assessment, i sold our place for 70k less then the citys assessment in june.

That assessment would have been based on the year previous. So that assessment would be exactly one year out of date when it comes to market value. I believe they are based on the market value as of July 1st, of the previous year.