Calgary Real Estate predictions?

[cmyden]

Originally Posted by chemgear

Us poor peeps already paying for places aren't going to really affect it - unless we all try to sell at the same time.

It's not a dangerously high level of inventory just yet, but it's getting there...

Current SFH inventory as of May 14: 5,454

On pace to break 6,000 by months end.

If it does manage to break 6,000 things could get interesting. The possibility of large price drops increases, perhaps this time without the emergency interest rate parachutes for rescue.

Or sellers could just retreat from the market a second time. Something tells me that could be more difficult for some sellers to do this time around.

SFH Month end inventory for previous years: May 2009: 3861
May 2008: 7099
May 2007: 3716

[chemgear]

Not Calgary (it's for GTA I think) but it's pretty mind boggling realtors are telling people to stop listing/trying to sell so many homes.

http://www.cp24.com/servlet/HTMLTemp...P24Hotproperty#

May 13, Part 3

But I guess this is what he is talking about:

http://ccmn41lv2h65votlvb823a1s2shmr...line-chart.xml

[Bill Bumface]

CMHC painting a rosy picture for Calgary:

Prices up year over year beginning in '10

[cmyden]

Originally Posted by hulkrogan

CMHC painting a rosy picture for Calgary:

Prices up year over year beginning in '10

Mike Fotiou posted a piece on the CHMC forecasts in his blog today:

http://calgaryrealestatereview.com/2...-2010-edition/

I like the bit at the bottom:

Here’s a cheat sheet to help you pass CMHC Economics 101:


Low inventory + High Demand = Price Increase



Increasing Inventory + Decreasing Demand = Price Increase



High Inventory + Low Demand = Price Increase

[Winsor_Pilates]

^ Yeah, CMHC math is pretty funny.
There was an article in the Van Sun today saying the same thing. Sales have dropped slightly, listings are up slightly, pricing are expected to rise 3.5% this year ????

I don't get it either, I'm expecting small price drops and a healthier buyers market for Vancouver.

[cmyden]

Originally Posted by Winsor_Pilates

^ Yeah, CMHC math is pretty funny.
There was an article in the Van Sun today saying the same thing. Sales have dropped slightly, listings are up slightly, pricing are expected to rise 3.5% this year ????

I don't get it either, I'm expecting small price drops and a healthier buyers market for Vancouver.

The sales drop for Vancouver seems slight, but hasn't the inventory growth been a bit more dramatic?

I have to say I don't follow Vancouver as closely, but it seems like this guy keeps some pretty decent stats:

http://agentwill.com/weekly-stats/




So far 2010 is actually exceeding 2008's pace for inventory.

Did Vancouver experience a similar large rise in 2008 inventory and subsequent dramatic price drop in '08 like we did here in Calgary before the emergency interest rates stopped the bleeding?

But I guess that's assuming the inventory growth peaks out late in the year like it did in '08.

[Winsor_Pilates]

Originally Posted by cmyden

The sales drop for Vancouver seems slight, but hasn't the inventory growth been a bit more dramatic?

I have to say I don't follow Vancouver as closely, but it seems like this guy keeps some pretty decent stats:

http://agentwill.com/weekly-stats/




So far 2010 is actually exceeding 2008's pace for inventory.

Sales would mirror that graph until the last couple of weeks as well, so there hasn't been a huge excess of inventory. New home development had pretty much stopped for a while during the rescission, so the inventory was soaked up as well. Now everyone is building again, and inventory is likely growing faster than the population.

Did Vancouver experience a similar large rise in 2008 inventory and subsequent dramatic price drop in '08 like we did here in Calgary before the emergency interest rates stopped the bleeding?

Bit I guess that's assuming the inventory growth peaks out late in the year like it did in '08.

We had the rise in inventory, but not as dramatic a drop in pricing. And pricing came back up much faster than in Calgary as well. Different factors will always keep Vancouver and Calgary different.
Actual Vancouver is very limited for land and surrounded by water or mountains, so there is never too much supply. Add to that, people actually desire and value urban living here and it's a very different picture for inner city or close to it. The prices in Vancouver held up pretty strong when everywhere else dropped dramatically.

Surrounding areas like Surrey, Langley etc. are more oversupplied, have lots of land and tend to get hit worse when prices drop. But they are seeing some of Canada's best immigration, so they hold up better than Calgary as well.

[Potty]

Originally Posted by cmyden

The sales drop for Vancouver seems slight, but hasn't the inventory growth been a bit more dramatic?

I have to say I don't follow Vancouver as closely, but it seems like this guy keeps some pretty decent stats:

http://agentwill.com/weekly-stats/




So far 2010 is actually exceeding 2008's pace for inventory.

Did Vancouver experience a similar large rise in 2008 inventory and subsequent dramatic price drop in '08 like we did here in Calgary before the emergency interest rates stopped the bleeding?

Bit I guess that's assuming the inventory growth peaks out late in the year like it did in '08.

Why such a difference between the end of a year and the start of the next? Numbers are different from 12-08 to 01-09 and 12-09 to 01-10.

[cmyden]

Actual Vancouver is very limited for land and surrounded by water or mountains, so there is never too much supply. Add to that, people actually desire and value urban living here and it's a very different picture for inner city or close to it. The prices in Vancouver held up pretty strong when everywhere else dropped dramatically.

Just wondering why you might think those same factors didn't seem to help, say, San Francisco, from having their bubble burst?




That's not to say I don't believe Vancouver should have the most expensive real estate in Canada, because I do. Just as San Francisco should be one of the most expensive in the USA. They are both highly desirable places to live, and it should always cost more per square foot to own a piece.

But desirability doesn't appear to provide immunity from deflating to fundamentals.

[Winsor_Pilates]

Originally Posted by cmyden

Just wondering why you might think those same factors didn't seem to help, say, San Francisco, from having their bubble burst?

Don't know enough about San Fran or most US cities to comment on it, but the USA in general went through something very different than Canada due to it's mortgage issues. Will Canada end up with these same issues? that's another debate.
Did San Fran resist the burst better than other US cities? Did Manhattan?
My guess is yes, they did for reasons similar to why Van resists better than Calgary and individual reasons for each city as well.

Another huge reason Vancouver resists more is the massive foreign investment. The housing prices are inflated by wealthy Chinese buyers, and this is unique to Vancouver over other cities.

That's not to say I don't believe Vancouver should have the most expensive real estate in Canada, because I do. Just as San Francisco should be one of the most expensive in the USA. They are both highly desirable places to live, and it should always cost more per square foot to own a piece.

But desirability doesn't appear to provide immunity from deflating to fundamentals.

Agreed, and Vancouver is certainly not immune; I've never claimed it to be. Just more resistant than Calgary. Vancouver prices did go down with the rescission, and I think will go down some more in the near future.
(But, apparently according to many here, no Realtor has or will ever say that )

[cmyden]

Originally Posted by Winsor_Pilates

Don't know enough about San Fran or most US cities to comment on it, but the USA in general went through something very different than Canada due to it's mortgage issues. Will Canada end up with these same issues? that's another debate.
Did San Fran resist the burst better than other US cities? Did Manhattan?
My guess is yes, they did for reasons similar to why Van resists better than Calgary and individual reasons for each city as well.

Yes, but the values in NY or SF only deflated by a lesser percentage than say, Phoenix or Las Vegas, because the values bubbled by a lesser percentage as well.

Atlanta fell about 8%, compared to around 38% for San Francisco, and I don't think anyone would point to Atlanta's high desirability or lack of land as reasons they didn't fall further than other U.S. cities. Same goes for Charlotte, Dallas, and other cities that didn't bubble up from their fundamentals as dramatically as the rest.

However, the correlation between how far the values fell (percentage wise) with how far they got away from their fundamental values (price to income for example, or price to rent) is very strong.

The 'desirability factor' and the fact that a city has a higher density is already priced into the market in either direction. So it just doesn't seem to make for a valid argument regarding a bubble deflating slower, faster, or not at all if one does believe there is a bubble to deflate.

Another huge reason Vancouver resists more is the massive foreign investment. The housing prices are inflated by wealthy Chinese buyers, and this is unique to Vancouver over other cities.

But wouldn't this higher demand for housing not also lead to higher rent prices? Which would then keep the price-to-rent-ratio on an even keel, rather than skyrocketing?

Agreed, and Vancouver is certainly not immune; I've never claimed it to be. Just more resistant than Calgary. Vancouver prices did go down with the rescission, and I think will go down some more in the near future.
(But, apparently according to many here, no Realtor has or will ever say that )

I guess that's just where I disagree. From what history has seemed to prove time and again with markets that have bubbled, the only real predictor of how far they drop is how far they got away from their underlying fundamentals in the first place. In that regards, Vancouver is truly in a league of it's own.

[Winsor_Pilates]

Originally Posted by cmyden

Yes, but the values in NY or SF only deflated by a lesser percentage than say, Phoenix or Las Vegas, because the values bubbled by a lesser percentage as well.

Did they? If Vancouver is the most "bubbled" city in Canada, wouldn't NY be the same for the US?

Atlanta fell about 8%, compared to around 38% for San Francisco, and I don't think anyone would point to Atlanta's high desirability or lack of land as reasons they didn't fall further than other U.S. cities. Same goes for Charlotte, Dallas, and other cities that didn't bubble up from their fundamentals as dramatically as the rest.
However, the correlation between how far the values fell (percentage wise) with how far they got away from their fundamental values (price to income for example, or price to rent) is very strong.

I'm not disagreeing that getting away from fundamentals is correlated to length to fall; that seems pretty obvious in any economic situation.
However, I do think that's over simplifying things and every city and even parts within cities have other factors that can hold them up from falling as much or lead them to fall faster.
That's why I think Vancouver didn't fall as much as Calgary did, and why it rebounded so strong. If it was as simple as looking at price to income, Vancouver would have crashed much more than anywhere in Canada in 2008.

The 'desirability factor' and the fact that a city has a higher density is already priced into the market in either direction. So it just doesn't seem to make for a valid argument regarding a bubble deflating slower, faster, or not at all if one does believe there is a bubble to deflate.

Don't understand what you're saying here, clarify?
If desirability is already priced into the market, than how is there a bubble? Wouldn't that make the "bubble" just the market value of desirability? Maybe I'm misunderstanding what you wrote here.
And I don't believe in bubbles, I believe in ups and down, and the speed up and slow down of markets.

But wouldn't this higher demand for housing not also lead to higher rent prices? Which would then keep the price-to-rent-ratio on an even keel, rather than skyrocketing?

Rent prices in Vancouver are ridiculous and have increased, but I agree the ratio is out of whack which is why I think prices will go down.

I guess that's just where I disagree. From what history has seemed to prove time and again with markets that have bubbled, the only real predictor of how far they drop is how far they got away from their underlying fundamentals in the first place. In that regards, Vancouver is truly in a league of it's own.

So what about 2008? Vancouver, and specifically the higher demand inner city areas of Vancouver that are most inflated barely dropped at all. My condo on Kits hardly fluctuated.
I don't disagree with your look at fundamentals at all, and think Vancouver has major issues here, but I think you're over simplifying things.
I would consider a cites desirability, location, available land, foreign investment and immigration to be fundamentals in Real Estate values as well. A couple of ratios and pie charts don't tell the whole picture.

By your logic, when this "bubble" bursts, will Vancouver prices drop below Calgary? because we're much further away from the fundamentals you list, and a drop based on only that would put us lower than Calgary.

[cmyden]

Originally Posted by Winsor_Pilates

Did they? If Vancouver is the most "bubbled" city in Canada, wouldn't NY be the same for the US?

Just based on my argument regarding getting away from the fundamentals, Vancouver would be more like our version of Phoenix or Miami than New York.

Vancouver deviated from the fundamentals by about the same degree as those two cities, in terms of price/rent and price/income metrics.



Regarding price to rent ratios for example, Vancouver was up to 27 at one point. I'm not sure if it ever ended up going higher than that or not. I'm guessing it may have, since Calgary's peak was close to that at one point.

By your logic, when this "bubble" bursts, will Vancouver prices drop below Calgary? because we're much further away from the fundamentals you list, and a drop based on only that would put us lower than Calgary.

No, a 20-25% drop in Calgary would return us to the fundamentals, with median home prices at approximately $315-$330k. I believe for Vancouver a 30-35% drop would bring it back close to their long term price/rent ratio. That still equates to higher home prices in Vancouver than Calgary.

2008 in Alberta might have been a sneak preview of how fast things can change when you get a large build up of inventory, coupled with decreased demand. It will be interesting to see what happens this time around.

Anyways, nobody can say for certain what will happen, and you're right of course that it's not so simple as to point to a few ratios and say this is what will happen. I've just always believed that long term fundamentals are a powerful force to be reckoned with.

[The Yen Man]

So some economists are now saying interest rates might not go up in the summer:

http://www.theglobeandmail.com/repor...rticle1574908/

[Bill Bumface]

Originally Posted by The Yen Man

So some economists are now saying interest rates might not go up in the summer:

http://www.theglobeandmail.com/repor...rticle1574908/

Not surprised. The current real estate market has them in an interesting spot. Things have cooled themselves off enough that there might not be too big of a worry trying to slow inflation. If you raise interest rates and house prices take a big fall, you'll end up with lots of defaulted mortgages.

[Wookie]

Originally Posted by hulkrogan

Not surprised. The current real estate market has them in an interesting spot. Things have cooled themselves off enough that there might not be too big of a worry trying to slow inflation. If you raise interest rates and house prices take a big fall, you'll end up with lots of defaulted mortgages.

I don't think that's going to happen. Or at least quickly enough that it's a concern (not saying I want rates to go up).

What percentage of people are on variable? What percentage of those are so leveraged to their rate that they go under when it changes a small amount? I don't have my mortgage calculator handy. But if rates go up 50 bps and you're on a variable (which already has you barely paying anything right now) is a 50 bps change going to annihilate the person and have them walk?

Right now I'm more concerned about the markets. OUCH

[chemgear]

Originally Posted by Wookie

I don't think that's going to happen. Or at least quickly enough that it's a concern (not saying I want rates to go up).

I want interest rates to go up and quickly. /popcorn

[The Yen Man]

Originally Posted by chemgear

I want interest rates to go up and quickly. /popcorn

Why? Do you take pleasure in seeing the Canadian economy collapse and people losing their jobs and their homes?

[Shazam]

People do know that many variable rate mortgages don't actually have their payments change when rates change, right?

[Frank MetaMusil]

Originally Posted by Wookie

Right now I'm more concerned about the markets. OUCH

Got any extra cash sitting around? The stock market is the only place on earth where people won't buy anything when its on sale....