Monthly Market Update

[JRW]

Originally Posted by calgarywinning

I thought single bedroom apartments were like $1250 to $1500. Where can you rent a house for 500k for 1800? $2500 would be the minimum.

While your equation is bias, it assumes a static point or a low point in the market place. The economy picks up pace and the value of the house is restored over time.

Why don't you hop on kijiji and look yourself?

http://www.kijiji.ca/b-house-rental/...5?price=__1800

there is hundreds of 3 bedroom houses/townhouses for rent below $1800/month. Assuming 1/3 of them is houses (not townhouses), that's still close to 200 homes.

Now, $500k home in Calgary is certainly nothing luxurious anymore, so I'm sure many of them are close to that in assessment. Either way, I would buy something better than I would rent, and I assume most people would do that. So don't get hang up on 500k house must = rent 1800/month. Because you don't rent the same thing that you buy.

Originally Posted by calgarywinning

Meanwhile if you which to change your situation you can sell your house for the loss and buy something else for the same loss for that static moment in time.

Riiiiiiight. You sell for a loss and then you buy for a loss. You forgot the part where you have that extra $150k that you still have to pay back to the bank.

[Kavvy]

Originally Posted by JRW

Why don't you hop on kijiji and look yourself?

http://www.kijiji.ca/b-house-rental/...5?price=__1800

there is hundreds of 3 bedroom houses/townhouses for rent below $1800/month. Assuming 1/3 of them is houses (not townhouses), that's still close to 200 homes.

Now, $500k home in Calgary is certainly nothing luxurious anymore, so I'm sure many of them are close to that in assessment. Either way, I would buy something better than I would rent, and I assume most people would do that. So don't get hang up on 500k house must = rent 1800/month. Because you don't rent the same thing that you buy.



Riiiiiiight. You sell for a loss and then you buy for a loss. You forgot the part where you have that extra $150k that you still have to pay back to the bank.

Hey JRW - any chance you will respond to my post?

[JRW]

Originally Posted by Kavvy

JRW please respond to my post. You took the time to put all the math into responding to Realtor1's post, but ignored mine, which should be simple enough to respond too.

If you were wrong and simply exaggerated your numbers in the post I was quoting, I understand that as well.

No Kavvy, I wasn't wrong, I just don't feel like doing your research for you. You have internet, use it.

OK here, I'll find three links for you in 10 mins.

Canadian home prices are overvalued by 63%, Deutsche Bank says
http://www.bnn.ca/News/2015/1/8/Cana...Bank-says.aspx

Housing market overvalued by as much as 30%, BoC says
http://www.theglobeandmail.com/repor...ticle22021768/

When the Bubble Bursts: Surviving the Canadian Real Estate Crash. The Edmonton-based portfolio manager is predicting a 50% decline in prices from current levels.
http://business.financialpost.com/pe...ational-level/

There are of course other lower predictions.

Personally I think somewhere in 20 to 30% range is likely.

[JRW]

Originally Posted by stampsx2

So you're saying it's better not to buy because this time the housing bubble may burst? You should re do those same numbers if the bubble didn't burst and see who comes out ahead.

Well the way I see it is not if, but when.

Now if you think you'll be able to sell before the economy downturns, then all the power to you.

Lastly, because it might very well happen in the next year or so, NOW is the stupidest time to buy IMO.

[Kavvy]

Originally Posted by JRW

No Kavvy, I wasn't wrong, I just don't feel like doing your research for you. You have internet, use it.

OK here, I'll find three links for you in 10 mins.

Canadian home prices are overvalued by 63%, Deutsche Bank says
http://www.bnn.ca/News/2015/1/8/Cana...Bank-says.aspx

Housing market overvalued by as much as 30%, BoC says
http://www.theglobeandmail.com/repor...ticle22021768/

When the Bubble Bursts: Surviving the Canadian Real Estate Crash. The Edmonton-based portfolio manager is predicting a 50% decline in prices from current levels.
http://business.financialpost.com/pe...ational-level/

There are of course other lower predictions.

Personally I think somewhere in 20 to 30% range is likely.

Chill out and calm down.... everyone you respond to, you seem to take offense too.
Thank you for the links - appreciate it.

[JRW]

Originally Posted by Kavvy

Chill out and calm down....

Will do.
It's only realtors1 responses that rubbed me the wrong way.

[Travis Munroe]

Originally Posted by JRW

What I find comical is discounting something simply because it last a long time. Great logic there.



Really?? Ok let's runs some fairly average numbers to see if they really would be ahead IF the bubble bursts and they have to sell before the market creates another bubble (if ever). Lets use your assumption of 5 years.

Rent house for 5 years at $1800/month: $108 000 Your assuming a $500,000 property is going to rent for $1,800 a month. This is not accurate and the link you later provided proves that.

Buy house, 500k house, 200k down, assume interest rate 2.6% for 5 years.
30% reduction in asset value, just by itself = $150 000. So right away your costs are much more than just renting. You say yourself that you predict a 20-30% drop at "some point" and to strengthen your numbers you are using the worst case scenario at 30%
Additional costs of owning:
Property taxes $3500/year = $17 500
Servicing 300k loan = $36 000
House maintenance 2000/year = $10 000
Home owners insurance 1000/year = $5000

Total cost of owning = $218 500
I don't think that's called "coming out on top"
Your predicition is also assuming the said buyer buys at the high and sells at the low.... if you carry your numbers to another 5 years with appreciation in the market the outlook drastically changes.


Obviously you have a pretty strong bias, but then again I hardly expect a realtor to be an objective source on this matter.
you should spend more time in this section... I feel as though I give a fairly balanced view on the topic.

My intent was not to ruffle any feathers. The "comical" statement came as you paint an absolute worst case scenario. Nobody should buy a home and anyone who has bought in the last 10 years needs to sell.

[Travis Munroe]

Originally Posted by JRW

No Kavvy, I wasn't wrong, I just don't feel like doing your research for you. You have internet, use it.

OK here, I'll find three links for you in 10 mins.

Canadian home prices are overvalued by 63%, Deutsche Bank says
http://www.bnn.ca/News/2015/1/8/Cana...Bank-says.aspx

Housing market overvalued by as much as 30%, BoC says
http://www.theglobeandmail.com/repor...ticle22021768/

When the Bubble Bursts: Surviving the Canadian Real Estate Crash. The Edmonton-based portfolio manager is predicting a 50% decline in prices from current levels.
http://business.financialpost.com/pe...ational-level/

There are of course other lower predictions.

Personally I think somewhere in 20 to 30% range is likely.

Other notable quotes from the articles

BNN

63% number comes by taking the average in home prices relative to income and home prices relative to rent. I personally would like to see a more complex equation and perhaps proof that the theory of this basic equation has been supported in the past.

Globe & Mail

Mr. Poloz said the central bank still anticipates a “soft landing” in housing, as economic growth and rising incomes gradually catch up to today’s high home prices.

“We thought we would have an opportunity during the downturn, and we were kind of waiting for the perfect window and then it never happened,”

Financial Post

The problem is he’s hardly the first person to make the call. And none of them has been right, while the people calling for a soft landing look increasingly accurate in their forecast.

The IMF said this week prices were up 60% during the past 15 years, on an inflation-adjusted basis, and the group is sticking with a call that prices could correct anywhere from 7% to 20%

[calgarywinning]

Riiiiiiight. You sell for a loss and then you buy for a loss. You forgot the part where you have that extra $150k that you still have to pay back to the bank.

You missed my point. If you sell at the low you buy at the low. Therefore the new house will rise in price as the market has always done. Your imaginary 30% drop of 150k is an extreme situation where you are forced to buy at the high and sell at the low. Presuming you still need shelter you buy in at the market at the low and conditions improve. You then sell at a loss, break even or increase. So your loss isn't the full 150k, presuming the market drops your 30%. If you happen to need your new home for a long period of time your home value increases.

Your mind is limited because you are commanding the definitions of the marketplace assuming people don't need their homes and also that they must list and sell them and the bottom of valuation. You are like that guy in science class that is pushing your hypothesis without considering the data. Yes, things can get bad, but for the most part home ownership and saving are better than not. And guess what, people need their homes.

The renter is simply paying interest without accruing capital or savings to the capital owner. Where as an owner is contributing to their own savings while being having the ability to use the market to their advantage.

If I had listened to your advice when I was 20 I would have never bought anything in Calgary. Bungalows were 180-220 in nice communities. My parents nay-sayed the prices. They reminded me the crash in the late 70's early 80's.

Instead I bought the best piece of property I could with the money I had saved and did well. I would hate for your advice to translate to any young people that were thinking of carving out their place in the world.

While waiting and timing are a virtue, buying something that is your home and you can live with for a longer period of time is a better way to go.

[Regorium]

As long as there are people like polak, and anecdotally, some of my friends who are just waiting for a nice dip in prices to buy in, I'm not worried at all. Pent up demand means that there is a nice cushiony floor to bounce off of, and in the meantime I'll keep taking rent.

However, once those people start changing their tune to "There's nothing left for me in Calgary", that's when I'll start getting really scared.

[lorenavedon]

a place to live (aka a home) isn't a discretionary expenditure that people can just cut out of their lives like the cable bill, the car, vacations, etc when times get tough. Nobody is saying things are great, but people still need a place to live. Apart from some over stretched investors dumping investments on the market, I don't see a huge rush of home owners dumping their homes and moving into cardboard boxes. Buyers might drop off a cliff and sellers will be stuck, but I don't see that translating into huge discounts in terms of much lower prices. Sure prices can come down, but people expecting %25-%30, keep hoping.

[Kavvy]

I love this thread.

So many extreme opposing view points with the quotes to prove it.

Come September, one side will hopefully need to admit they were wrong.

I guess the "bubble crowd" doesn't have too ever admit they are wrong (to be fair, I am in this crowd to some degree).

As I said in a deleted post... who knows where prices will go, but if you try and tell me that right now we don't have a higher chance then anytime in the last 7 years of a crash occurring... I think you are ignoring the facts.

If you are a first time buyer, you can't wait forever, no. However, can you wait an extra 6 months for the biggest purchase of your life to see of some very unique circumstances play-out in a certain way - yes, you should.

[polak]

Originally Posted by Regorium

As long as there are people like polak, and anecdotally, some of my friends who are just waiting for a nice dip in prices to buy in, I'm not worried at all. Pent up demand means that there is a nice cushiony floor to bounce off of, and in the meantime I'll keep taking rent.

However, once those people start changing their tune to "There's nothing left for me in Calgary", that's when I'll start getting really scared.

How long does oil stay low? If there's no work, all of the transplants will eventually start shuffling back.

It's all dependent on oil prices.

My buddy just took possession of a townhouse that he bought right as oil prices hit bottom (not the brightest). Now his builder is offering those townhouses with a year of no condo fees and upgrades.

It's nice to see the builders start to squirm. Hopefully they get desperate.

[lorenavedon]

Originally Posted by polak

How long does oil stay low? If there's no work, all of the transplants will eventually start shuffling back.

Calgary is not a worker camp where your shuffle off after works ends. Maybe it was that way in the 70s and 80s but now It's one of the best cities to live in. The economy sucks all over Canada. Why would people leave Calgary to go and be unemployed somewhere else that's not as nice either?

[Travis Munroe]

Originally Posted by polak

How long does oil stay low? If there's no work, all of the transplants will eventually start shuffling back.

It's all dependent on oil prices.

My buddy just took possession of a townhouse that he bought right as oil prices hit bottom (not the brightest). Now his builder is offering those townhouses with a year of no condo fees and upgrades.

It's nice to see the builders start to squirm. Hopefully they get desperate.

It is always obvious when the market on new builds slow as builders attitudes towards realtors change and all of a sudden they are reaching out like we have been friends our whole life.

[Kavvy]

Originally Posted by lorenavedon

. but now It's one of the best cities to live in. The economy sucks all over Canada. Why would people leave Calgary to go and be unemployed somewhere else that's not as nice either

You're kidding right?

I have no problem with people being proud of the city they live in, but this oversimplified view applied to the economics of our housing market was meant to be green text.... right?

Calgary is a city of immigrants, including immigrants from elsewhere in Canada. When times get tough, people move back home.

Home is where the heart is. To recent Calgary immigrants, Calgary may not be home yet, and I hate to blow your bubble, but Calgary may not be a nice as where they came from - in their eyes.

[lorenavedon]

Originally Posted by Kavvy

You're kidding right?

I have no problem with people being proud of the city they live in, but this oversimplified view applied to the economics of our housing market was meant to be green text.... right?

Calgary is a city of immigrants, including immigrants from elsewhere in Canada. When times get tough, people move back home.

Home is where the heart is. To recent Calgary immigrants, Calgary may not be home yet, and I hate to blow your bubble, but Calgary may not be a nice as where they came from - in their eyes.

sure, some people. Everyone is unique. But we're talking about generalizations and big numbers here not a handful that want to move back home because they just lost their jobs. You're expecting some sort of mass exodus from Calgary?

[Kavvy]

Originally Posted by lorenavedon

sure, some people. Everyone is unique. But we're talking about generalizations and big numbers here not a handful that want to move back home because they just lost their jobs. You're expecting some sort of mass exodus from Calgary?

Not at all.

I expect a minor decline in population. With housing volume only going up due to new builds in new communities, and the densification in communities like Altadore (see all the open houses of brand-new duplexes sitting empty), I expect this to put downward pressure on the housing prices.

Population = decline (heck even constant)
Quantity of homes = increase
Price = decline

[lorenavedon]

I don't see the population declining. If anything it will still go up but just very slightly instead of booming. I also don't see a flood of new properties on the market. Yes tons of new builds coming but we're going from like zero inventory to a normal amount now. It's not like we had tons for sale and now we're overflowing. The listing rush is over. If you look at MLS we had tons of new listings in Feb to frontrun the spring market but it's completely died off. Our active listings are not high at all now. Almost half what they were in 2009. Sales will drop off yes I agree because obviously people will be cautious. This will mean that price increases will be unlikely for a long time, but I don't see a meaningful price pullback either. And to be honest, I still see hot areas in the inner city continuing to be hot for good quality and well priced properties. Something reasonable in a good area still sells right away. There is tons of pent up demand in this city still that will put a floor on pricing. Buyers will be more picky so if you're trying to sell a below grade condo in the middle of nowhere that's dilapidated, good luck, probably won't happen.

Difference between Calgary housing and the US crash is, that in the US, Mcdonald workers with 1 million dollar homes are going to have trouble paying the mortgage. In Calgary we have a well off middle class with ballooning RRSPs they can tap into, TFSAs, severance packages, EI, dual incomes so they can cut back and live off 1 income, investments etc. So while the consumer discretionary spending will probably drop off a cliff, I don't see a bunch of people desperate to sell their homes.

I'm just trying to be perfectly honest and reasonable here.

[calgarygeologist]

Looks like Q1 for the Calgary housing market is at -2.3% for average price and -1.2% for median price. Apartments/condos are down 3.2% and 5% respectively.