Time to sell?

[Slava]

Originally Posted by Claeren

Concrete Equities is, incidently, a horrible little company. <Mod edit> They only stay a float because they pray on the uninformed and because the market has been even stronger then their own incompetence - which says more about the market then them....



Claeren.

Well its no secret that when the real estate market is abnormally strong then all kinds of these opportunities present themselves. Usually they end badly for the poor investor who doesn't know any better.

[photon]

Originally Posted by Claeren

This is a serious threat to the market. PArt of the reason prices kept rising was that speculators who had made a lot of money were able to afford more and more houses. That doesn't mean that the end buyer who wants that house can even qualify for the mortgage!!

But the market hasn't been driven by speculators, it's been driven by huge inmigration from other provinces. Alberta's seeing the biggest movement of people into it from other provinces in Canada's history, ever. That has a much larger impact than a few thousand speculators I'd say.

Even qualifying for $280k (until recently the entry level price for a one bedroom condo for much of the city) is difficult for most single income people. Yo uneed what, $70k/yr to qualify for that as a first time buyer?!

And what's the average household income in Calgary? Census #'s for that aren't out until May next year, but stuff I've read puts Calgary at the highest houshold income in Canada short of Ottawa. I think in 2005 the median income was $75000+, and salaries in Alberta have been increasing much faster than the rest of the country as well.

Affordability is higher but still within reason.

Add to that the stricter lending criteria and there are a LOT of people out of the market. Basically it had gotten to the point that speculators were just buying from other speculators. Now that the speculators are getting out of the market....

True, and those people tend to move to another market, either somewhere else in Alberta or other provinces, but there are more people coming in to replace them than are leaving.

And remember that relative to inflation even flat home pricing is actually losing ~4.5%+/yr. If prices drop and stablize at 10% over the next year they have actually dropped ~15%.

Which isn't necessarily a bad thing.. I guess unless you are looking for a quick flip. But prices going down would help investors who are looking to buy rental properties, make it a bit more realistic.

But long term I just can't see things stopping, the amount of money being pumped into the economy for the projects NE of Edmonton is staggering. Some have compared it to six hoover dams being built (similar amount of employment).

Just because some people can't afford to live in Calgary doesn't mean it will stop.. only when it becomes too expensive for most people to afford or the supply really ramps up can it turn around.

[Claeren]

I disagree.

~30,000 people/year will move here when they can afford homes. But the housing industry is building more homes this year than ever before, and building more and more each year if needed as well. This leads to a LARGE section of the new growth merely buying up new homes.

Combine with that the large number of speculators. You say a few thousand, but it is FAR more than that. I by myself probably know a few hundred for god sakes!! And those are just people with multiple homes+ that are doing it aggressivily. And everyone out there who is building a home while living in another is a speculator, and of those there are many many many MANY thousands out there. In fact a lot of the softness right now i because of all of those people taking possession of news homes built over the summer.

Add to that the fact that housing prices themselves are slowing more outside immigration, that high prices here are creating an incentive for people to leave the city and to cashout and toughening lending criteria and it is not a great market at all.


I agree i do not see it crashing any more than anywhere else in Canada, but i do not see it being a great investment vehicle over the next 5 years.




Claeren.

[OracleOfCalgary]

Originally Posted by photon

But long term I just can't see things stopping, the amount of money being pumped into the economy for the projects NE of Edmonton is staggering. Some have compared it to six hoover dams being built (similar amount of employment).

OK, so we have an explanation for the real estate market in Fort McMurray... except the RE market in Ft. Mac has not seen the same insanity that Calgary has... see something wrong with this picture?

And the amount of speculation in the Calgary RE market has been huge. My buddy has been involved with selling a new condo project in suburban Calgary. He says that 80% of their buyers so far have been investor/flippers. Mostly blue collar people trying to cash in on the tail end of the RE boom because everyone else is doing it.

[Fobby]

Originally Posted by photon

I think in 2005 the median income was $75000+, and salaries in Alberta have been increasing much faster than the rest of the country as well.

Try 50k/year for average income in Calgary. That average, factors in A LOT of ppl making well into the 6 figures. There are a lot of ppl making high 30s and low 40s. If you didn't sell your soul to O&G, that's what you will be making. 75k means an average of 36 dollars an hour. Giving what the minimum salary is in Alberta. Again, I am doubting your 75k median figure.

OT, I would love to know where you work Photon, and are you guys hiring?

[Claeren]

Originally Posted by Fobby

Try 50k/year for average income in Calgary. That average, factors in A LOT of ppl making well into the 6 figures. There are a lot of ppl making high 30s and low 40s. If you didn't sell your soul to O&G, that's what you will be making. 75k means an average of 36 dollars an hour. Giving what the minimum salary is in Alberta. Again, I am doubting your 75k median figure.

OT, I would love to know where you work Photon, and are you guys hiring?

Exactly, that is my experience as well.

Average middle class earnings in Calgary right now from what i have heard is about ~$48k and for most it is certainly less than that before it is more....

And of course that is gross earnings, not net.

Even with two working people making that money it is hard to qualify for more than a small condo in Calgary these days.



Claeren.

[photon]

Originally Posted by Claeren

I disagree.

~30,000 people/year will move here when they can afford homes. But the housing industry is building more homes this year than ever before, and building more and more each year if needed as well. This leads to a LARGE section of the new growth merely buying up new homes.

Actually housing starts were down over 16% from last year. Though that's still a large # of starts. And I agree, they'll continue to build as long as there is demand, but they can't keep up with demand, hence the increase.

Combine with that the large number of speculators. You say a few thousand, but it is FAR more than that. I by myself probably know a few hundred for god sakes!! And those are just people with multiple homes+ that are doing it aggressivily. And everyone out there who is building a home while living in another is a speculator, and of those there are many many many MANY thousands out there. In fact a lot of the softness right now i because of all of those people taking possession of news homes built over the summer.

I guess I see the word speculator as different.. I don't think I'm a speculator at all (ask my wife, I have a very low risk tolerance). I try to look at all the big picture economics that drive these things before making a decision. A speculator makes a decision based on a rumour or some such.

I don't think most people investing in Alberta are speculating, because they are doing so based on the economics of the situation.

Add to that the fact that housing prices themselves are slowing more outside immigration, that high prices here are creating an incentive for people to leave the city and to cashout and toughening lending criteria and it is not a great market at all.

No doubt about it, those things have a drag on things.. and that's a good thing, that's why we're not still at 45% increase in one year.

I agree i do not see it crashing any more than anywhere else in Canada, but i do not see it being a great investment vehicle over the next 5 years.

I agree with it not crashing down (slowing for sure) but I still think there's a good run left for Alberta for the next 6-7 years at least, there's so much investment going into the province.

But I'm always open to new information too

[photon]

Originally Posted by Fobby

Try 50k/year for average income in Calgary. That average, factors in A LOT of ppl making well into the 6 figures. There are a lot of ppl making high 30s and low 40s. If you didn't sell your soul to O&G, that's what you will be making. 75k means an average of 36 dollars an hour. Giving what the minimum salary is in Alberta. Again, I am doubting your 75k median figure.

OT, I would love to know where you work Photon, and are you guys hiring?

That's according to Statistics Canada 2001 census, take it up with them if you doubt the figures. And that's household, not an individual.

http://www.rbc.com/economics

If you have other stats, please show them. When looking at the big picture economically it doesn't matter if person X makes $30k a year and has to move somewhere else if two people making $50k a year replace them.

[photon]

Originally Posted by Claeren

Even with two working people making that money it is hard to qualify for more than a small condo in Calgary these days.

And yet in 2007 so far over 13,000 people have bought new houses, half of those more than $424,000, most of which had to qualify for a mortgage.

Half the guys in my office bought new homes in the past 8 months and moved into them.. sure they spent a lot more than they would have wanted to, but that's the choice that has to be made.

Lenders are doing things like 35 and 40 year ammortizations to make things affordable for people.

Look at the affordability numbers here: http://www.rbc.com/economics/market/pdf/house.pdf

A two story house is still more affordable in Calgary than the national average.

[mykalberta]

Are you sure the 75K isnt a household income - ie requirng 2 incomes?

I consider myself lucky to make +60K (when you factor in bonus last 2 years) when my salary started at low 40's less than 4 years ago and I dont work O&G

I know that I will never be able to afford a home (I am talking single structure, you own/lease the land you sit on, have a yard etc). I dont consider a condo (what I live in now), townhouse, 4 plex, du plex, mbile home to be an actual "home".

I know the only way I afford a "home" in the liveable centres in Alberta is to get married and hope the chick I marry makes at least 1/2 of what I do and then throw out the Dave Ramsey economics I live my life by and mortage myself to the hills with lines of credit coming out the wazoo.

I gave serious consideration to moving East of Alberta before I dropped a 1/4 of a mil on 900 sq ft.

MYK

[Bend it like Bourgeois]

Affordability is a relative thing.

I'll bet there are people on this site that have mortgages ranging from $500 to $5000 a month. In every case it was probably a lot of money at one time (maybe still is).

I also think affordability is sometimes confused with entitlement. Not aiming that at anyone, just a comment. Things are still plenty affordable in Calgary, just maybe not on the timeline everyone would like.

[REDVAN]

As someone who is looking at getting into the market, the best thing that can happen to me is for prices to fall a lot and then stabilize for a while (at which time I buy) and then for them to go back up. I am not holding my breath.

[Fobby]

Most "household" have dual income. Both parents work. Thus the number do line up correctly with the average income of a Calgarian.

That is 2 incomes. To be able to barely afford a house in Calgary. I have a few friends in the same boat. Brand new mortgages, 400k ish. their mortgage payment are 1900, and 2300 a MONTH, for the next 35 - 40 years. Dual Income, 80k. After tax, brings in what, close to... 4000 a month after tax? Yes it's affordable if it's only the 2 of them. What if they want kids in the future? what if when ONE income goes out the door? Can you afford to have a "home" where your family can grow?

Mortages uses to be 700 - 800 bucks a month. Nowadays, that's a car payment. Prices keep going up, but salaries doesn't. Eventually there will be a upper class, and a lower class.. bye bye middle class

[SeeGeeWhy]

Originally Posted by OracleOfCalgary

OK, so we have an explanation for the real estate market in Fort McMurray... except the RE market in Ft. Mac has not seen the same insanity that Calgary has... see something wrong with this picture?

And the amount of speculation in the Calgary RE market has been huge. My buddy has been involved with selling a new condo project in suburban Calgary. He says that 80% of their buyers so far have been investor/flippers. Mostly blue collar people trying to cash in on the tail end of the RE boom because everyone else is doing it.

My friend's parents own a trailer in Ft Mac that is worth $500k. A TRAILER! How is that "sane" at all?

Also, to the comments about infrastructure - how much longer can you expect to focus on building roads and LRT before the other services required by a large city (health care, schools, police, fire, EMT, etc) become so neglected that the city can no longer "reasonably" expand?

[Dion]

Originally Posted by Fobby

Mortages uses to be 700 - 800 bucks a month. Nowadays, that's a car payment. Prices keep going up, but salaries doesn't. Eventually there will be a upper class, and a lower class.. bye bye middle class

There is no middle class anymore. Just the upper class and those barely getting by.

Peoples debt loads in Canada are quite high. From what i've read they're not paying down their debts but merely making the monthly payments. It's as if these people think good jobs and wages will continue forever. Sadly they don't and when the down turn in the job market comes, and it will someday, watch out!

[Sylvanfan]

Originally Posted by Dion

Peoples debt loads in Canada are quite high. From what i've read they're not paying down their debts but merely making the monthly payments. It's as if these people think good jobs and wages will continue forever. Sadly they don't and when the down turn in the job market comes, and it will someday, watch out!

Yeah, but thats not just all related to housing. How many people are driving around in new cars, or going to all inclusive resorts on vacation two times year, smoke or drink regulary, or wear ultra fancy clothes, and other stuff like that? IMO a place to live is a neccessity, you can't get by without one, or at least not very comfortably. All that other stuff....that can be cut out of your life for cheaper alternatives.

Besides this country has a lot more people over the age of 35 than under. Most people over that age are fine. I'm guessing during the 70's when the first wave of baby boomers starting coming online and hitting their purchasing years and forcing interest rates up and up until the early 80's everyone was saying the same thing. Sure there were some rough patches, but the difference was that generation didn't have enough people above them to lend them money. Today the echo generation will eventually survive as their parents are generally wealthy and will be passing their wealth down to their children eventually.

[Dion]

Originally Posted by Sylvanfan

Yeah, but thats not just all related to housing. How many people are driving around in new cars, or going to all inclusive resorts on vacation two times year, smoke or drink regulary, or wear ultra fancy clothes, and other stuff like that? IMO a place to live is a neccessity, you can't get by without one, or at least not very comfortably. All that other stuff....that can be cut out of your life for cheaper alternatives.

Of course it's not all related to housing. The fact that credit is easy to get these days and people are spending more than what they are bringing in. Loans for a new car, home improvments, vacations etc. I worked with a lot of people like this. Their biggest fear was losing their job and wondering how they would continue to make the payments.

Here's some interesting stats.....

Canadian Personal Debt Concerns Paralleling America's

http://www.associatedcontent.com/art...ralleling.html

Again mirroring the situation of its southern neighbor, Canada's average mortgage rate has shot up, going from 6% to 7.24% in the last 12 months. Some Canadians are finding themselves in over their heads with their mortgage load and other debts.

Canadian personal debt is up 27% from what it was in 2003.

"If rates continue to rise to offset inflation those consumers servicing a heavy debt load could be caught short. It is a double edged sword. Inflation means higher costs for goods and services which can place a strain on the average household income. Higher interest rates are needed to slow this inflation and that can place pressure on consumers if they are not in a strong financial position to pay the increased costs of borrowing," Scott Hannah, President of Canada's Credit Counselling Society, said in the press release.

Besides this country has a lot more people over the age of 35 than under. Most people over that age are fine. I'm guessing during the 70's when the first wave of baby boomers starting coming online and hitting their purchasing years and forcing interest rates up and up until the early 80's everyone was saying the same thing. Sure there were some rough patches, but the difference was that generation didn't have enough people above them to lend them money. Today the echo generation will eventually survive as their parents are generally wealthy and will be passing their wealth down to their children eventually.

I lived through the bust of the 80's and watched friends of mine lose everything. They had their own house and rental properties all with large mortgages. Doing much the same thing people are doing today. Riding the crest of the boom thinking everything is going to be okay. The bust comes and suddenly they have mortgages worth more than what the house is valued at. People handed their keys to the bank and walked away from their homes. I doubt will have another bust like we had in the 80's. Then again no one saw the bust of the 80's coming either.

True the echo generation will survive.

[Draug]

Photon, you mention an Exit Strategy.....

You peaked my curiosity.

Honestly, I agree with your whole take on the economy and realestate values in Calgary. I too expect a return to 'normal' growth. I expect good growth over the next 5 years. I'm confident enough in that to make realestate my investment of choice right now.

But, beyond 5 years, a person is really just guessing. Anything can happen....

What are you meaning by Exit Strategy?

[suegate]

Originally Posted by Sylvanfan

Hard to say....in terms of total dollars you might do quite well to upgrade as places in the mid range could have fallen by say 8% but the entry level is down on 5% type of thing. It's all about whats for sale and what price range has the most places for sale.

Even if your place has dropped 8% in the past three months....8% of 300k is a smaller loss than 8% of 450k is. As much as everyone would love to sell their house for top dollar and buy their next one for a bargain basement rate....it doesn't always work that way. Unless you can store your stuff and live in a box for a few months in the mean time.

Uhhh...8% is 8%. It's a smaller loss for 300k because 300k is less than 450k, but when you're talking percentages, it's exactly the same. That's the reason people use percentages to compare things...

[photon]

Originally Posted by Fobby

Most "household" have dual income. Both parents work. Thus the number do line up correctly with the average income of a Calgarian.

That is 2 incomes. To be able to barely afford a house in Calgary. I have a few friends in the same boat. Brand new mortgages, 400k ish. their mortgage payment are 1900, and 2300 a MONTH, for the next 35 - 40 years. Dual Income, 80k. After tax, brings in what, close to... 4000 a month after tax? Yes it's affordable if it's only the 2 of them. What if they want kids in the future? what if when ONE income goes out the door? Can you afford to have a "home" where your family can grow?

Mortages uses to be 700 - 800 bucks a month. Nowadays, that's a car payment. Prices keep going up, but salaries doesn't. Eventually there will be a upper class, and a lower class.. bye bye middle class

If people choose to spend beyond their means that's not a market problem, that's a person acting dumb problem. There are homes in Calgary to be had for 300k, you just can't expect to have the 2 story 2400 square foot monster in the burbs for that price. 300k, 20% down, 25 year mortgage, $1500 a month with taxes. A person making $50k a year should have no problem with that, that's around 40% of gross income, 30% is better but 40% is very low compared to many cities around the world.

Or maybe they should move to a place where homes are more affordable, Regina is one of the most affordable cities in the world.

Or maybe they should plan things out a bit more, my family is mostly single income (wife does the odd contract) and I make less than that household average, and we have a kid, but we planned and saved and did things so that we could have a large enough house and not be house poor. It wasn't easy (and I give all the credit to my wife who's very good at that kind of thing).

I don't disagree with you in that it pushes the middle class out, and I don't disagree that it's tough for some people.. but the economy doesn't care if some people get squeezed and have to move or settle for less. It's just numbers, prices, inmigration, employment, etc.. the numbers tell the big picture story which is what needs to be looked at to decide if an investment is a good idea or not. How does something being unfair or not nice change the economics?

It's not nice that in Vancouver, that same 2 income $80k's family would be paying $4600 a month for their place. Or that instead of 5 years average salary to buy an average home in Calgary, in some cities it's 11 years average salary.. But that's how some places are.

And yes the salaries are increasing, I think they were up over 10% average in Alberta last year, that's HUGE compared to the rest of the country. I didn't get that, and many others didn't, but from an overall economy point of view that's important.