Calgary Real Estate predictions?

[macker]

Originally Posted by chemgear

Heh!

Not sure if green text intended or not but although some may see you as a sell-side analyst of sorts the monthly figures and other stats that you post are always interesting and there were early adopters to this thread that were truly doom and gloomers.....you are quite neutral compared to them.... This thread is a testament to just how long a real estate cycle is Could still be another year or two before there is the significant correction that people have been hinting at for years. To say that it will never happen is short sighted.

[ranchlandsselling]

Originally Posted by macker

This thread is a testament to just how long a real estate cycle is Could still be another year or two before there is the significant correction that people have been hinting at for years. To say that it will never happen is short sighted.

To say that it will happen is very long sighted too! It may never happen as any of the nay sayers have predicted but for an entirely different reason in some future day.

It's like fan who's always saying the flames suck and are going to lose. Sometimes they're right and it makes them feel good about themselves but if they're wrong it's not a big deal because the people that weren't wrong didn't lose are still happy and forget about the "they suck" fan.

[macker]

Originally Posted by ranchlandsselling

To say that it will happen is very long sighted too! It may never happen as any of the nay sayers have predicted but for an entirely different reason in some future day.

It's like fan who's always saying the flames suck and are going to lose. Sometimes they're right and it makes them feel good about themselves but if they're wrong it's not a big deal because the people that weren't wrong didn't lose are still happy and forget about the "they suck" fan.

You might be right....maybe real estate crashes are things that happen to people in other countries at other times; crises do not happen to us, here and now. We are doing things better, we are smarter, we have learned from past mistakes. The old rules of valuation no longer apply. Unfortunately a highly leveraged, housing market can unwittingly be sitting with its back at the edge of a financial cliff for many years before chance and circumstance provoke a crisis of confidence that pushes it off.

[ranchlandsselling]

Originally Posted by macker

You might be right....maybe real estate crashes are things that happen to people in other countries at other times; crises do not happen to us, here and now. We are doing things better, we are smarter, we have learned from past mistakes. The old rules of valuation no longer apply. Unfortunately a highly leveraged, housing market can unwittingly be sitting with its back at the edge of a financial cliff for many years before chance and circumstance provoke a crisis of confidence that pushes it off.

And with that you've jumped into the dramatic talk.

I never said "we do things better, we are smarter, we have learned from past mistakes or they happen to other people in different countries" FFS. In fact I said nothing even remotely close. I wonder every day if things could take a serious nosedive. OSFI meddling with CMHC, mortgage insurance, inflation, interest rates, etc. There's a ton of "what ifs" out there that scare me. I'm kind of in the market for a new house but wonder and flip and flop on those very items every day.

In the end the decision I will make will likely be:
1. What can I afford now
2. What can I afford in the future under a given interest rate environment.
3. What will rental rates be in the future.

The rest is just noise. Unfortunately those above 3 questions are very very difficult.

All I was saying is: to say is going to happen is about as useful as saying it will never happen. Even though one side is likely to be correct (the it will happen), there's a chance when it happens it might not be for the reasons that all the current naysayers are saying.

This thread was started almost 4.5 years ago and there's been no massive fallout in Calgary. The guy posting the Alberta Bubble Blog hasn't been here in 1.5 years the last post on that blog was 2010. Some other doom / gloom blogs last post was 2009. None of those people were predicting the government would pass off CMHC to OSFI or debate it's outright removal from the market or privatization. Change in amortization rates, amortizing HELOC's, 65% HELOC max, etc.

Heck the next major real estate fall out in Calgary could come in 3 years because oil becomes obsolete. The smart people who thought real estate was a good investment would likely say "damn, didn't see that coming, I was able to afford the place I bought, I can make my payments at various interest rates, I didn't borrower too much etc." and the naysayers would probably say "idiots, I knew real estate was going to tank".

[Cowboy89]

Originally Posted by ranchlandsselling

This thread was started almost 4.5 years ago and there's been no massive fallout in Calgary.

You don't think the price declines seen in Calgary since 2007 are serious? It's not Phoenix style or California style but a lot of CMHC insured buyers who bought back then are underwater right now without any further price declines from here. I don't really view the tone in this thread as apocalyptic but rather initially as an attempt to provide rational thought into what was at the time an irrational market. The lack of real estate price appreciation since the thread inception is actually evidence that a lot of people were correct.

[Slava]

Originally Posted by Cowboy89

You don't think the price declines seen in Calgary since 2007 are serious? It's not Phoenix style or California style but a lot of CMHC insured buyers who bought back then are underwater right now without any further price declines from here. I don't really view the tone in this thread as apocalyptic but rather initially as an attempt to provide rational thought into what was at the time an irrational market. The lack of real estate price appreciation since the thread inception is actually evidence that a lot of people were correct.

That seems like a bit of a stretch to me. All I heard from naysayers in 2008-2009 (and even into 2010) was that "we are 1 1/2 years behind the US" and basically the writing is on the wall. Maybe we were/are, but the regulations changed, consumer habits changed (albeit slightly) and we never saw what happened in the US happen here.

The lack of appreciation isn't comparable to what took place down there, clearly, and in truth many people in the US would dream of this soft landing we had in Canada. I know that you are in general agreement with me here, and you note that. I wish I took a picture of the sign I saw in Phoenix this past weekend that was advertising "houses in the $30's". No digit missing, thats thirty thousand bucks! You might find a deal like that in Pontex Saskatchewan, but that kind of cash doesn't get you a enough land to put a shed on it in most Canadian cities.

[zuluking]

Originally Posted by Slava

You might find a deal like that in Pontex Saskatchewan, but that kind of cash doesn't get you a enough land to put a shed on it in most Canadian cities.

Ponteix, Saskatchewan for the record.

[chemgear]

Originally Posted by macker

Not sure if green text intended or not but although some may see you as a sell-side analyst of sorts the monthly figures and other stats that you post are always interesting and there were early adopters to this thread that were truly doom and gloomers.....you are quite neutral compared to them.... This thread is a testament to just how long a real estate cycle is Could still be another year or two before there is the significant correction that people have been hinting at for years. To say that it will never happen is short sighted.

Hehe yes, I was kidding with the picture.

I actually joined up on the forum in 2010 to participate in this thread because it looked rather interesting. I tend to be a numbers guy and it has been good to get different viewpoints and data. I am glad that some of the earlier angst and personal attacks seem to have ebbed (I recall somebody getting mad at me for putting happy faces in my post to indicate my lack of seriousness - I had not known about the "green text" back then. )

To be fair, I'm not any kind of expert and am always looking for contrasting views and information that I may have missed. CP is pretty darn good for that. In the end, it's a pretty interesting time right now to watch the market here and the machinations in Europe - who knows how it will ultimately pan out. How will all these debt loads unwind, what will happen?

[bizaro86]

Originally Posted by chemgear

Hehe yes, I was kidding with the picture.

I actually joined up on the forum in 2010 to participate in this thread because it looked rather interesting. I tend to be a numbers guy and it has been good to get different viewpoints and data. I am glad that some of the earlier angst and personal attacks seem to have ebbed (I recall somebody getting mad at me for putting happy faces in my post to indicate my lack of seriousness - I had not known about the "green text" back then. )

To be fair, I'm not any kind of expert and am always looking for contrasting views and information that I may have missed. CP is pretty darn good for that. In the end, it's a pretty interesting time right now to watch the market here and the machinations in Europe - who knows how it will ultimately pan out. How will all these debt loads unwind, what will happen?

The european debt situation is definitely interesting. It's kind of like musical chairs. Everyone knows there isn't enough money to pay back some of that debt, so they're passing it around to see who gets stuck with it.

[The Yen Man]

At the end of the day, it's all a crapshoot whether housing will go up, stay the same, or come crashing down. I liken it to economists. Half of them will say the economy will face a recession, while half will predict a boom. That way, someone is always right (and they will often let the other half who are wrong know about it).

Here's how I've noticed the general opinion in this thread. People who own real estate tend to have a rosier picture, while people looking to get into the market often take a much more pessimistic view. None of them are wrong, but biases often does affect judgement.

[macker]

Originally Posted by bizaro86

The european debt situation is definitely interesting. It's kind of like musical chairs. Everyone knows there isn't enough money to pay back some of that debt, so they're passing it around to see who gets stuck with it.

Also watching Australia is very interesting right now as their economy is very similar to ours and the housing situation is also quite similar. The Reserve Bank of Australia cut rates in November and December 2011 and that did nothing to restore confidence to the housing market so they again just recently cut rates by another 50 basis points. Australias housing market is buckling under the pressure of high household debt.

[chemgear]

Originally Posted by macker

Also watching Australia is very interesting right now as their economy is very similar to ours and the housing situation is also quite similar. The Reserve Bank of Australia cut rates in November and December 2011 and that did nothing to restore confidence to the housing market so they again just recently cut rates by another 50 basis points. Australias housing market is buckling under the pressure of high household debt.

Interestinly, FP just published this article less than an hour ago - rather bold prediction by the author. On a side note, the segment from The National had a panel member reference Australia as a "soft landing" . . . so far?

http://business.financialpost.com/20...ays-economist/

Albert Edwards, economist with Société Générale, put out a note on Thursday morning whose title says it all: “The biggest bubble in recent history is heading for the mother of all hard landings.”

[bizaro86]

Originally Posted by macker

Also watching Australia is very interesting right now as their economy is very similar to ours and the housing situation is also quite similar. The Reserve Bank of Australia cut rates in November and December 2011 and that did nothing to restore confidence to the housing market so they again just recently cut rates by another 50 basis points. Australias housing market is buckling under the pressure of high household debt.

Their economy is similar but their housing market is quite a bit more unaffordable than ours. Demographia's study put the Australia national median price to income ratio at 6.7, whereas Canada's national median was 4.5. (major markets over 1 million in population)

For the average CPer at 100k, a 450k house is way more affordable than a 670k house!

Seriously though, the major markets in Australia could have a 32% decline in house prices for them to be equally affordable to Canada, and that's including Vancouver and TO in the Canada number.

Edited to add for local content:
Calgary's multiple was just over the Canadian major market average at 3.9. By comparison, Australia's oil and gas capital of Perth has a score 5.1.

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

[ranchlandsselling]

Additionally Australia has a completely different mortgage system. They don't have a CMHC or similar entity to insure mortgages (from what I understand) and as such experience much higher interest rates then we do in Canada.

http://www.theaustralian.com.au/busi...-1226344969834

National Australia Bank's standard variable rate will fall from 7.31 per cent to 6.99 per cent, effective from Friday.

http://www.apimagazine.com.au/api-online/rate-update

I see a 5-year fixed as low as 6.20% and as high as 7.19%.

[bizaro86]

Originally Posted by ranchlandsselling

Additionally Australia has a completely different mortgage system. They don't have a CMHC or similar entity to insure mortgages (from what I understand) and as such experience much higher interest rates then we do in Canada.

http://www.theaustralian.com.au/busi...-1226344969834

National Australia Bank's standard variable rate will fall from 7.31 per cent to 6.99 per cent, effective from Friday.

http://www.apimagazine.com.au/api-online/rate-update

I see a 5-year fixed as low as 6.20% and as high as 7.19%.

That would make affodability even worse when you measured it by payments. If houses are more expensive per dollar of income, and interest rates are higher, it stands to reason mortgage payments are much, much higher per every dollar of income.

[macker]

Originally Posted by bizaro86

That would make affodability even worse when you measured it by payments. If houses are more expensive per dollar of income, and interest rates are higher, it stands to reason mortgage payments are much, much higher per every dollar of income.

If you look at debt in all forms for both countries total debt % of GDP Canada is 276 and Australia 277 both have very similar debt levels that need to be reigned in. This figure includes debt from households, non-financial corporations, financial institutions and governments.

[macker]

Originally Posted by ranchlandsselling

Additionally Australia has a completely different mortgage system. They don't have a CMHC or similar entity to insure mortgages (from what I understand) and as such experience much higher interest rates then we do in Canada.

http://www.theaustralian.com.au/busi...-1226344969834

National Australia Bank's standard variable rate will fall from 7.31 per cent to 6.99 per cent, effective from Friday.

http://www.apimagazine.com.au/api-online/rate-update

I see a 5-year fixed as low as 6.20% and as high as 7.19%.

Australia has also deleveraged to a greater extent vs Canada. Since the debt crisis in 2008 total debt % of GDP for Australia is down 14% and Canada we are actually up 17%. Deleveraging has just begun in the 10 largest developed economies and only Australia -14%, US -16%, and South Korea -16% have dropped their total debt % of GDP. Japan, UK, Spain, France, Italy, Canada and Germany have all increased total debt.

[Bill Bumface]

I'm glad after those rosy late 90's/early 2000s the world taught me that it's actually always on the verge of falling apart, so be thankful every day you still have a house and a job, because they are both likely gone tomorrow, but if not then the next day... or maybe the day after that.

[chemgear]

Some good articles of interesting information the last few days (and good discussion and exchanges in this thread - I like it!) I hadn't caught this one from Macleans until now:

http://www2.macleans.ca/2012/05/01/h...r-gdp-numbers/

Does this mean housing is becoming a larger and larger share of our economy? Indeed, it does. Take a look at this graph we put together using StatsCan data, which shows how construction and real estate-related financial services have been growing over the past decade as a share of GDP:

Between 1997 and 2003 the housing market’s share of the economy was 17 per cent or less. Today, it accounts for nearly 19 per cent. Now, a two per cent rise isn’t peanuts when you’re talking about a trillion-dollar economy.


I'm not sure that a comparison with Spain holds any water but their construction bubble topped out at 15% of GDP before it popped. For what it's worth I guess - perhaps very little.

[bizaro86]

Originally Posted by macker

If you look at debt in all forms for both countries total debt % of GDP Canada is 276 and Australia 277 both have very similar debt levels that need to be reigned in. This figure includes debt from households, non-financial corporations, financial institutions and governments.

Right. But if interest rates are lower, the same amount of debt costs less on a month by month basis.