Real estate in Calgary - another bubble?

[Fuzz]

Originally Posted by GoinAllTheWay

Man alive.....I have always seem to have the worst timing....

Finally decide it's time to move and naturally, this happens. And all starts with selling a condo to boot, haha.

Our plan was to sell condo first, rent a place short term while we look for a home but now it's looking like we could be stuck in limbo for a while.

I'm not willing to overpay and waive things like home inspections just to buy a home, that's nuts.

ugh....what to do....

Is the situation in Calgary that bad? I'd keep looking now, not get swept up in waiving conditions or bidding wars, but don't sit it out. If the market is rising, you are going to regret it in a year.

[blankall]

Originally Posted by Winsor_Pilates

Anyway, don't want to take the thread off topic with Vancouver talk.

For Calgary, I can't believe people are talking "bubble". Hasn't the market been relatively flat for almost 10 years now?
How is that anything remotely resembling a bubble? I think some upside to the Calgary market is overdue.

I don't get this either.

At a 2% interest rate you can buy a $800k house with 20% down with a mortgage payment of $2,700/month. Most families are dual income these days, so you're talking about $1,350/month each. Very affordable.

The fact you can still buy detached in Calgary for under $500k is astounding. The only thing holding Calgary back was a high unemployment rate. As soon as the job market picks up again, I would expect things to rise substantially.

Where exactly is the "bubble"? Is Calgary going to drop another 30%? If so, that's more suggestive of a fundamental and long term issue with the city.

[Fuzz]

Originally Posted by blankall

I don't get this either.

At a 2% interest rate you can buy a $800k house with 20% down with a mortgage payment of $2,700/month. Most families are dual income these days, so you're talking about $1,350/month each. Very affordable.

The fact you can still buy detached in Calgary for under $500k is astounding. The only thing holding Calgary back was a high unemployment rate. As soon as the job market picks up again, I would expect things to rise substantially.

Where exactly is the "bubble"? Is Calgary going to drop another 30%? If so, that's more suggestive of a fundamental and long term issue with the city.

And who amoung us doesn't have $160k just sitting around?

[blankall]

Originally Posted by Fuzz

And who amoung us doesn't have $160k just sitting around?

A lot of people who are already in the market will have that equity built up. Additionally, many dual income couples who are 35 or so should be able to save that much. You can each take out $35k from your RRSPs.

There's also the trend of generational transfers. As that trend spreads to other cities, which it will, you'll see more first time buyers jumping in with $1-$300k down payments.

These are all the downfalls of cheap money. The government has been printing money and lowered interest rates to all time lows. This is the inevitable outcome.

I'm not suggesting that everyone should just jump into a $800k house as their first house. You will be surprised, however, just how many people will have access to that $160k.

[Vinny01]

Originally Posted by GoinAllTheWay

Man alive.....I have always seem to have the worst timing....

Finally decide it's time to move and naturally, this happens. And all starts with selling a condo to boot, haha.

Our plan was to sell condo first, rent a place short term while we look for a home but now it's looking like we could be stuck in limbo for a while.

I'm not willing to overpay and waive things like home inspections just to buy a home, that's nuts.

ugh....what to do....

The market is no where near this level right now. You can certainly purchase a home with conditions and there are several properties that have been listed for a while.

We went into the market with the strategy of finding the house we want and make the move on it and then sell our current house. The big risk we took there obviously was being in a potential position where we may need to fire sale our current house.

My wife wanted no part of finding a rental house and waiting for the right house so we went after the house we wanted then sold. As I mentioned in my post on the first page we ended up taking a hit on our place but it was purchased at the peak of the 2014 boom. When we entered the market though we had best case hopes and ended up getting $17k more than that and sold our place the day before we planned to list it as our realtor had clients that wanted a house just like ours.

I think making the move while rates are low makes the most sense. When we bought our place we included a home inspection and even got 90 days possession to allow us to sell our place. When we moved our place quickly we revised the possession date from mid-May to the end of March.

[MillerTime GFG]

Originally Posted by blankall

A lot of people who are already in the market will have that equity built up. Additionally, many dual income couples who are 35 or so should be able to save that much. You can each take out $35k from your RRSPs.

There's also the trend of generational transfers. As that trend spreads to other cities, which it will, you'll see more first time buyers jumping in with $1-$300k down payments.

These are all the downfalls of cheap money. The government has been printing money and lowered interest rates to all time lows. This is the inevitable outcome.

I'm not suggesting that everyone should just jump into a $800k house as their first house. You will be surprised, however, just how many people will have access to that $160k.

Do you have any evidence supporting this stuff? I think you'd be surprised how many people DON'T have access to 160k. Sure, those that have been in the market for > 10 years may have it, but I'd say around 1 in 20 first time buyers have 20% down, and far fewer on 800k homes.

Most dual income families around the age of 35 do not have $160,000 in liquid assets readily available for down payment.

[blankall]

Originally Posted by MillerTime GFG

Do you have any evidence supporting this stuff? I think you'd be surprised how many people DON'T have access to 160k. Sure, those that have been in the market for > 10 years may have it, but I'd say around 1 in 20 first time buyers have 20% down, and far fewer on 800k homes.

Most dual income families around the age of 35 do not have $160,000 in liquid assets readily available for down payment.

The best evidence is that many homes in Canada are selling for this amount with traditional mortgages. Once again, I wasn't saying that most first time buyers should jump into a $800k house. If you want to run the same numbers with a starter home in the $500k range, you're looking at $100k down and monthly payments of $1,700. If it's the 20% people are struggling with, there are lenders who will offer financing with less than 20% down.

I also think your vastly underestimating how many people are getting help from their parents.

For the record, I don't think this is a positive outcome in any way. I think it's absolutely horrible. We are seeing economic mobility being degraded in a serious way. People who already have capital or who's parents have it make out like bandits. People who are working on fixed salaries get f-ed. It's destruction of the basic social contract.

It's the result of successive governments kicking economic woes down the road, with no real plan on how to resolve them.

Edit: to add some hard figures to my post:

Average detached home price in Canada is at about $500k now. Almost half of mellenial buyers get help from their parents with a downpayment:

Although 72 per cent of millennials in KPMG’s survey said their goals include owning a home, almost half (46 per cent) of the ones who have bought a house relied on financial help from their parents to boost their down payment.

https://www.theglobeandmail.com/glob...ticle34157168/

[CliffFletcher]

The other G&M article I posted put the number of millennial buyers getting parental help at more like 70 per cent. We’re reverting back to an era when your personal wealth was largely inherited, and some families owned property for generations and some families never owned property.

Estimates are around $3 trillion will be passed down from Canadian boomers to their children and grandchildren over the next 20 years. You have to think governments are going to try to tax that somehow.

[MillerTime GFG]

Very rarely do you find gifted down payments for households that already have saved at least 5% on their own. Gifts are generally to get households to the 5%-mark.

I assume you mean "conventional" mortgages as opposed to traditional, but keep in mind many of those purchases are for people much older than the 35-year old range you eluded to.

What you think is affordable vs. what OSFI think is affordable are two different things. The stress test is at 4.79%, so you need to base your monthly payments at that rate, not the contract rate.


I can assure you most families at the age of 35 do not have 20% down payment. So now you're looking at max 25 year amortization, with insurer guidelines, and a lot of people in this age group still have unsecured debts. Vehicle loans, student loans, credit cards/LOCs, etc.

[blankall]

Originally Posted by MillerTime GFG

Very rarely do you find gifted down payments for households that already have saved at least 5% on their own. Gifts are generally to get households to the 5%-mark.

I assume you mean "conventional" mortgages as opposed to traditional, but keep in mind many of those purchases are for people much older than the 35-year old range you eluded to.

What you think is affordable vs. what OSFI think is affordable are two different things. The stress test is at 4.79%, so you need to base your monthly payments at that rate, not the contract rate.


I can assure you most families at the age of 35 do not have 20% down payment. So now you're looking at max 25 year amortization, with insurer guidelines, and a lot of people in this age group still have unsecured debts. Vehicle loans, student loans, credit cards/LOCs, etc.

I don't disagree with you, that most people can't afford the ludicrous prices of real estate right now. I couldn't be more in agreement with that.

The properties are, however, selling. They are largely now selling to local people. Once again, the driving factor looks like help from parents. Down payment and co-signers. It's a trend that has overtaken Toronto/Vancouver and is now spreading to other cities.

[CaptainYooh]

Originally Posted by blankall

...
Average detached home price in Canada is at about $500k now. ...

One of the most useless stats, actually. It's not worth the effort that goes in collecting the data to arrive at this average. Even provincial averages are not very useful or indicative of anything other than year-over-year trending patterns. Only municipality-specific stats are relevant and important. Buying a $1M low-end house in Toronto/Vancouver, where the demand vastly outstripped supply is very different from buying a house in rural Manitoba/Saskatchewan where you could buy a house for a paper clip and a promise to not leave. Here's your $500,000 average.

[blankall]

Originally Posted by CaptainYooh

One of the most useless stats, actually. It's not worth the effort that goes in collecting the data to arrive at this average. Even provincial averages are not very useful or indicative of anything other than year-over-year trending patterns. Only municipality-specific stats are relevant and important. Buying a $1M low-end house in Toronto/Vancouver, where the demand vastly outstripped supply is very different from buying a house in rural Manitoba/Saskatchewan where you could buy a house for a paper clip and a promise to not leave. Here's your $500,000 average.

I don't disagree. It's far from perfect data, but the trend is more important. Yes, you are correct that it doesn't provide any detail on where the price increases are occurring.

[Fuzz]

Originally Posted by blankall

I don't disagree with you, that most people can't afford the ludicrous prices of real estate right now. I couldn't be more in agreement with that.

The properties are, however, selling. They are largely now selling to local people. Once again, the driving factor looks like help from parents. Down payment and co-signers. It's a trend that has overtaken Toronto/Vancouver and is now spreading to other cities.

Isn't Millertime a mortgage broker? I think I'll take his word on this over your suspicions. I suspect he has plenty of direct experience.

[TorqueDog]

Our neighbourhood has seen a bunch of properties drop off of Realtor.ca, so I have to imagine stuff $700k - $1.1m have started moving. That may be a completely unfounded assumption, but eh.

[peter12]

My overall impression here is that there are significant differences between Calgary and Vancouver. No surprises.

[Fuzz]

Originally Posted by peter12

As someone who has done a lot of work with the CMHC, I can confirm blankall is correct. Domestic generational wealth is driving this market.

By "this market" do you mean Vancouver, or Calgary? And by "confirm" do you have facts you can provide, or do we just take you at your word?

[peter12]

Originally Posted by Fuzz

By "this market" do you mean Vancouver, or Calgary? And by "confirm" do you have facts you can provide, or do we just take you at your word?

Vancouver. This isn’t just some anecdote. It is a well-established fact that most households under 35 are receiving some kind of down payment help.

Give this a read.

https://www.theglobeandmail.com/opin...-is-under-way/

[peter12]

We received *some* help but I have friends who got into 1M+ properties with half a million coming from their parents downsizing.

[Vinny01]

I know a handful of people who have places in Vancouver who are in their mid 30’s. It is a small sample size but they were gifted money when their parents sold big on their homes so they could buy the places they live in now.

Vancouver would be a very frustrating place to live as jobs typically pay a little less and it is crazy expensive to buy a decent place out there.

[Calgary14]

Originally Posted by Fuzz

Isn't Millertime a mortgage broker? I think I'll take his word on this over your suspicions. I suspect he has plenty of direct experience.

This is exactly what I was gonna say. I think he's a mortgage broker who would have experience with this stuff all day, everyday, not just assumptions or general stats. That means alot when talking about what the typical first time home buyers finances look like