Calgary Real Estate predictions?

[username]

Ya, I know that some people were getting mortgages that were around 25% back in the early 80's.

Think of all the people in the last 5 years that have 300K plus mortgages with rates below 5%. Now imagine rates rocketing up to 20% again what that would do? How many of these people do you think could afford 60K a year in interest on their house alone when they barely qualified for that initial mortgage at a rate below 5%?????

Scary stuff to think about......

[amorak]

Originally Posted by The Yen Man

I guess at the end of the day, no one really knows what's going to happen in the future. Some people think interest rates will increase dramatically, some people don't. Even professional analysts can't seem to agree, so it's not surprising the wide range of opinions reading through this thread.

My completely non professional opinion is that yes, interest rates will inevitably go up, but probably to the 4-6% range max in the next 5 years; enough to cool down the housing market, but not enough to tank the economy. I just can't see it hitting the 8% mark when the US economy is still in shambles.

Quoted for thieving my opinion

[amorak]

Originally Posted by username

Ya, I know that some people were getting mortgages that were around 25% back in the early 80's.

Think of all the people in the last 5 years that have 300K plus mortgages with rates below 5%. Now imagine rates rocketing up to 20% again what that would do? How many of these people do you think could afford 60K a year in interest on their house alone when they barely qualified for that initial mortgage at a rate below 5%?????

Scary stuff to think about......

Hence why there's no way in blue hell this happens. You'll see the BoC raise rates to a manageable level (4-6%) at a very reasonable pace, so that those that mortgaged themselves to the ragged edge will have time to sell and move on down.

[The Yen Man]

Originally Posted by amorak

Quoted for thieving my opinion

You're welcome

[username]

Originally Posted by amorak

Hence why there's no way in blue hell this happens. You'll see the BoC raise rates to a manageable level (4-6%) at a very reasonable pace, so that those that mortgaged themselves to the ragged edge will have time to sell and move on down.

I wouldn't say there's no way in hell that will happen again. If you would have told me in July 08 that oil prices would be 35 bucks by Dec of 08 and that the world wide banking industry was about to collapse I probably would have thought you were insane.

Now to suggest that inflation could hit 10 percent in the next 5 years really isn't that insane when one considers that the global money supply has ballooned in the last 16 months. Combine that with the possibility of 150 dollar oil again and ya, 15% interest rates are not ridiculous to consider. I'm not saying it's going to happen, just it's not as insanse as oil hitting 33 dollars from a high of 150

[amorak]

Originally Posted by username

I wouldn't say there's no way in hell that will happen again. If you would have told me in July 08 that oil prices would be 35 bucks by Dec of 08 and that the world wide banking industry was about to collapse I probably would have thought you were insane.

Now to suggest that inflation could hit 10 percent in the next 5 years really isn't that insane when one considers that the global money supply has ballooned in the last 16 months. Combine that with the possibility of 150 dollar oil again and ya, 15% interest rates are not ridiculous to consider. I'm not saying it's going to happen, just it's not as insanse as oil hitting 33 dollars from a high of 150

Interest rates =! Oil prices. Commodity prices swing with a lot of volatility, that's a known fact. Interest rates don't, apart from that ridiculousness we call the 1980's.

I cannot see us going over 10%, even if all the stimulus related hyper-inflation concerns many pundits have talked about come true.

[amorak]

I would also like to add: Opinions are like @ssholes - everyone's got one.

If anyone actually knew what was gonig to happen they'd

A) be a billionaire

B) be clairvoyant.

But it's interesting to discuss differing viewpoints

[chemgear]

Originally Posted by The Yen Man

My completely non professional opinion is that yes, interest rates will inevitably go up, but probably to the 4-6% range max in the next 5 years; enough to cool down the housing market, but not enough to tank the economy. I just can't see it hitting the 8% mark when the US economy is still in shambles.

I'm no expert either, but what is very interesting to me is say we take the current median house price $354 K ($450K SFD) and assume a rare substantial downpayment of 20%. A hike of "just" 5% is what, $1200-1500 a month MORE in costs? Where does first time home buyer interest sit then? And five years might be a little optimistic view of timing - who knows though.

http://www.cbc.ca/smartshift/2010/02...d-cd-howe.html

[cmyden]

Originally Posted by username

Ya, I know that some people were getting mortgages that were around 25% back in the early 80's.

Think of all the people in the last 5 years that have 300K plus mortgages with rates below 5%. Now imagine rates rocketing up to 20% again what that would do? How many of these people do you think could afford 60K a year in interest on their house alone when they barely qualified for that initial mortgage at a rate below 5%?????

Scary stuff to think about......

Actually what's scary is that even just a 1-2% increase would put a lot of Canadians underwater.

Anyone looking for some excellent analysis of what's going on in Canada should really check out this blog...

http://www.edmontonhousingbust.com/

The title implies bias, but Kevin does a pretty great job of just using facts and figures to make his points. The amount of work he puts into it is incredible, and blogs like his should be the kind of info people are digesting as opposed to the drivel in say, the Herald, or any other publication that relies on real estate industry advertising.

[The Yen Man]

Originally Posted by chemgear

I'm no expert either, but what is very interesting to me is say we take the current median house price $354 K ($450K SFD) and assume a rare substantial downpayment of 20%. A hike of "just" 5% is what, $1200-1500 a month MORE in costs? Where does first time home buyer interest sit then? And five years might be a little optimistic view of timing - who knows though.

http://www.cbc.ca/smartshift/2010/02...d-cd-howe.html

That's true. When I budgeted to see if I could afford my new house, I actually used a worst case scenario of 10% interest rate to make sure I could still make the payments if it ever hit that high.

[username]

Originally Posted by amorak

Interest rates =! Oil prices. Commodity prices swing with a lot of volatility, that's a known fact. Interest rates don't, apart from that ridiculousness we call the 1980's.

I cannot see us going over 10%, even if all the stimulus related hyper-inflation concerns many pundits have talked about come true.

I didn't actually say interest rates = oil prices??? I was alluding to the fact that rates rising to 10% wouldn't be as crazy of an idea as the thought of 33 dollar oil in December of 08.

I'm very curious as to why you think interest rates would stay below 10% if we did incur hyper inflation? Based on what? That's what every central bank's real mandate is in the world, is to control inflation. The one real tool they have to do this is by controling interest rates. So how would they cool inflation if they couldn't raise rates over 10% should inflation hit say 12 percent???????

[MJM]

Originally Posted by chemgear

Hmmm, looks like the real estate talk has moved to this thread.

Calgary ratio of house price to income is kicking around 4.6 - Vancouver at 9.3 LOL.

http://www.demographia.com/dhi.pdf





I would suggest rates will be "relatively low" only in the context of the low current rate as they increase them. It won't happen overnight, but I seriously doubt they'll keep giving out free money for another 10 years - haha, can you imagine the bubble scenario then?!

Is that median income or per individual? I have a hard time believing the median income per individual in calgary is 77K.

[Cowboy89]

Originally Posted by MJM

Is that median income or per individual? I have a hard time believing the median income per individual in calgary is 77K.

I don't, a lot of people make a lot of money in this town.

[hmmhmmcamo]

Originally Posted by MJM

Is that median income or per individual? I have a hard time believing the median income per individual in calgary is 77K.

I'm guessing that it's the median household income

[username]

Yes it's median household income.

[chemgear]

Originally Posted by hmmhmmcamo

I'm guessing that it's the median household income

Yup, looks that way in the study/pdf.

[amorak]

Originally Posted by username

I didn't actually say interest rates = oil prices??? I was alluding to the fact that rates rising to 10% wouldn't be as crazy of an idea as the thought of 33 dollar oil in December of 08.

I'm very curious as to why you think interest rates would stay below 10% if we did incur hyper inflation? Based on what? That's what every central bank's real mandate is in the world, is to control inflation. The one real tool they have to do this is by controling interest rates. So how would they cool inflation if they couldn't raise rates over 10% should inflation hit say 12 percent???????

I am saying that, with the experience from the 1980's and , thanks to computer, we lot more accurate and timely data available. I have a lot of faith in the BoC and unless something unseen comes up, I think we now have the tools to avoid a 1980's inflationary spike again.

[fundmark19]

Good news everyone! If interest rates go to 10 I can still make the payments! My life would be very very boring but I could do it. I knew there must be one upside of getting married. DUAL INCOME! First paycheque of the month for both of us would go pay mtg second pay bills and living expenses.

[Sylvanfan]

The income numbers are likely house hold income.

As for the 18% interest rates in the 1980's the country was in such a different place demographically you really can't compare it. It was an era where you simply had 4 kids all trying to borrow money from their 2 parents to start out in life. Going forward the demographics are much more balanced.

Also with the Bank of Canada now controlling interest rates they don't just arbitrarily set rates, they do it to keep inflation at certain levels. If they have to increase the rates to a level of 8%, it's because there has been enough inflation to make this a requirement. So things like incomes and the price of everything else will have or should have increased too.

[MJM]

Originally Posted by Cowboy89

I don't, a lot of people make a lot of money in this town.

So do I, but that's because we generally hang around with the people/social class work with. I'm not naive enough though to think everyone is making atleast 80K a year. For everyone doctor/lawyer/accountant there is in Calgary, there's a safeway worker, janitor, or admin assistant.