Calgary Real Estate predictions?

[Winsor_Pilates]

subprime are not the same as 40 yr, 0 downs at all. Canada does not have the syptoms that the US had, and should not have the same results.

Having said that, the US market plays into Canada alot, and even if the problem wasn't ours, it will effect us. Canada's real estate drop is a latent effect of the US screw up, and to predict it will have the same collapse as the direct effect they had is quite bold.
The biggest threat to Canadian housing prices is fear, and if fear can cause us to collapse as much as the US did, that's pretty sad. I hope it doesn't happen and don't thinkg it will.

[Claeren]

American Sub-prime IS different than Canadian 40yr/0-down mortgages but they are not completely different either.

In both cases when the market falls the owner is in a negative equity position immediately.

There are already thousands of Calgarians who owe banks tens of thousands of dollars more than their homes are worth despite making massive oversized mortgage payments for the last 0-18 months and will remain in severe negative equity positions for years to come -- trapped in their homes indefinitely. People SHOULD be in fear, the truly scary part is that people get such bad financial advice from so-called 'experts' that they have no idea how fragile their financial positions are.

I would not make any large financial bets that the effect of one (40yr/0-down) will be that much different than the other (sub-prime). The drop might not be as fast or as low but it is still coming, even if it is just a matter of inflation eating away at values for 20 years.



Claeren.

[tvp2003]

I'm no expert but isn't the big difference between the US and Canada situation the interest rates and resulting foreclosures? Our interest rates are holding pretty steady right now, so even if you are on a variable rate, you should still be able to make your payments regardless of whether you're in a negative equity position or not. On the other hand, the interest rates on the subprime mortgages are going up and all of a sudden people can't afford to make their payments and are walking away from their homes. Same thing caused the bubble burst in the 80's -- sky-high interest rates meant people couldn't afford their homes anymore.

Anyone know what the foreclosure rate is in Canada? Calgary?

[troutman]

Interest rates don't have to double for your mortgage payments to double. Someone better at math than me can explain how this works.

[Lurch]

Originally Posted by troutman

Interest rates don't have to double for your mortgage payments to double. Someone better at math than me can explain how this works.

Someone bad at math might be able to do it, but no one good at math should be able to. If interest rates double, the interest portion of your payment should approximately double. At the limit, if you have a very long amortization (40 yrs might get close), the payment would exactly double (unless I am bad at math which is very possible!)

[The Yen Man]

Selfishly, as someone who's already saved up a decent down payment, and just sitting back and seeing how much more house prices will fall, I'd be pretty happy if house prices continued falling.

[troutman]

Originally Posted by Lurch

Someone bad at math might be able to do it, but no one good at math should be able to. If interest rates double, the interest portion of your payment should approximately double. At the limit, if you have a very long amortization (40 yrs might get close), the payment would exactly double (unless I am bad at math which is very possible!)

Thanks - what I was trying to write wasn't making sense to me. A financial planner was trying to explain this to me yesterday.

http://www.tdcanadatrust.com/mortgages/afford.html

[burn_this_city]

Anyone bullish in this market is just lying to themselves.

[Wookie]

Originally Posted by fotze

You can certainly tell how peoples opinions on the market's direction are guided by their personal situation. Guys who just bought are bullish and guys hoping to buy are bearish, but there is no bias at all.

Yup.

The only thing you can really look at are what the same place is selling for. What I was saying about my area. One is now priced $20,000 below what I bought mine for and what one sold for a few days ago. It's a retired couple, they bought a long time ago, but now have to sell because they have to move the husband into a home because of alzheimer's. It's a poor time to have to sell quickly. You can see what "having to sell" does to you in this type of market.

[Winsor_Pilates]

Not Calgary, but my biggest competitor for my Surrey projects just went up in flames.

http://www.news1130.com/news/topstor...mepage&section=

[Winsor_Pilates]

Originally Posted by The Yen Man

Selfishly, as someone who's already saved up a decent down payment, and just sitting back and seeing how much more house prices will fall, I'd be pretty happy if house prices continued falling.

I'm half in this boat and half in the other. As a young person fairly new to the workforce, I'd love to see prices down so I can get in more in both stocks and real estate.
As a person employed in real estate, this market sucks because it hurts my pay cheques and career development.

[Draug]

Originally Posted by Winsor_Pilates

I'm half in this boat and half in the other. As a young person fairly new to the workforce, I'd love to see prices down so I can get in more in both stocks and real estate.
As a person employed in real estate, this market sucks because it hurts my pay cheques and career development.

Me too.... one half of me is ok with some dropping, and one half likes the value to keep growing.

We bought a bungalow in Glamorgan back in 2001, just as we were married. Paid $220K then, it peaked at about $575K eighteen months ago, and is now right around $450K. Still a super investment.

But, my family has outgrown this house. We need a larger house for the kids. I really want to buy an acreage, but youre looking at $850k+ (at todays market) or so for any in areas I want to be in.

So, on one hand, the drop has been nice in allowing me to look at acreages. On the other hand, if I buy the acreage and it continues to plummet, I'd be screwed. And I cant wait and wait because I need the space asap. I am not sure what to do...

[metal_geek]

Originally Posted by Claeren

You sound exactly like bulls in Florida, Phoenix, Las Vegas and California did about 2 years ago.

Income is a huge factor in home prices BUT income and employment will be easing significantly for the next ~5 years. Home prices are also about 30% above what income suggests they should be.

As for the other factors you mention, they only matter when land is restricted (which it is not in Calgary) and/or where there is less CAPACITY to build than there is demand. Since capacity has grown to reach and then exceed demand prices (like they would with any consumer product) should no longer grow.

I see it already with new woodframe condos dropping and dropping their prices. Why would I buy a 2 year old condo in the suburbs for $320k (its price at peak) when I could buy a brand new one for $209k just as far from downtown? And those prices will keep dropping as well....


But keep on hoping, maybe hope will hold those prices up?


Interestingly, the industry lists price drops as one year declines but the market peaked more than one year ago. So when they say prices are down 5.6% they could really be down 12% since peak.



Claeren.

I not bullish on the situation at all.. What I am saying is that media reporting on the "meteoric rise of nortel stock" causes just as much problems as the media does talking of "Mortgage Crisis to hit Canada"..

I'm saying that Country wide we are all in a tougher situation then we were 18 months ago. On an equal basis some regions are more desirable then others. I agree that in Calgary affordability is an issue, and that the market is correcting. What we need is a slow controlled correction, and that's what we would get if it weren't for the dramatic headline.

As for the capacity exceeding the demand, that's beyond obvious at the current prices. If the price falls enough the demand will go back up. we could sell every single house in the city in one day if the price were a dollar each!... The point I was making is flashey blanket statements by the media only fuels the problem.

Part of the condo problem is while affordable.... nobody with a family wants to live in a condo... The city requires the "burbs" to build in density that nobody wants. It was great when single family homes were 400k but as the price corrects condo's have to be given away.

[Wookie]

For years, bankruptcy trustees and credit counsellors in Calgary haven't had enough work.

"We are seeing people now who are going into bankruptcy, walking away from properties that in the last . . . four years in Calgary has been very, very, very rare," said David Smith, a trustee in bankruptcy at Bromwich & Smith Inc. "Now it's becoming more common."
In July, 494 Albertans declared bankruptcy -- a 24 per cent increase from the previous year, according to the Office of the Superintendent of Bankruptcy.

There has also been a hike in the number of people who can't keep up with their mortgage payments.
Statistics from the Canadian Bankers Association -- compiled from the seven major banks -- show the number of Albertans who haven't paid their mortgage for three or more months has nearly doubled in a year.
There were 1,301 people behind on their mortgage payments in July, up from 702 people a year earlier.
A real estate expert believes there is no need to panic.
Don Campbell, president of Alberta Real Estate Investment Network, said the number is relatively small, making up 0.28 per cent of the 471,913 mortgages across Alberta.

http://www.canada.com/calgaryherald/...1-2735e2009cc1

[Table 5]

For those in the real estate, I have a question that hopefully someone can answer.

When i purchased a condo 2 years ago, I was tentatively approved for a mortage by a bank (but since they only guaranteed it for 3 months, it long expired). This time around, with the current tricky financial situation, I'm not sure I would be so easily approved. If I don't get approved, can I walk away from my condo without having to pay any sort of penality? Or do they keep my down-payment?

What's the rental market in Calgary like these days? Do a lot of people rent out their condos if they dont live in them?

[Burninator]

Home-price slide in double digits

Median sale prices for single-family homes in Calgary have plunged in the range of $45,000 to $66,000 in September from their peaks just over a year ago.

Data from Calgary realtors Gary and Mike MacLean, of Re/Max Real Estate Central, also show the median sale price for a Calgary condominium has plummeted by $44,000 from its peak.
...
In the single-family home market, the average sale price was $444,048 while in September 2007 it was $470,888 -- a decrease of 5.7 per cent. The median sale price also dropped by 6.06 per cent to $395,000, from the $420,500 a year ago.
...
In the condominium market, average sale prices in September dropped by 10.6 per cent to $287,426 from $321,614 a year ago and median prices decreased by 11.7 per cent to $265,000 from $300,000.


http://www.canada.com/calgaryherald/...2-da0b07708ecc

[photon]

That depends on your purchase agreement.. usually there are conditions when you make an offer to purchase, one of those conditions being financing.

Usually though there's a date where you waive the financing condition (which means you have satisfied yourself that you have or will have a mortgage in place to close), and usually that date is very close to the time you place the offer, not close to the time when you actually close.

Without knowing the details of the agreement it's hard to say, but unless your agreement is unusual I'd say it's highly likely you'd stand to forfeit your down payment if you walked away.

The rental market is still fairly strong, though specifically the condo rental market is softer and will continue to get worse IMO because of the huge # of condos coming on the market in the next while, a large chunk of which are people who purchased for the intent of flipping, can't and now have to rent to try and cover themselves.

You can always rent it out, the question will be will you be able to rent it out for enough to cover your mortgage.

[troutman]

Originally Posted by Table 5

For those in the real estate, I have a question that hopefully someone can answer.

When i purchased a condo 2 years ago, I was tentatively approved for a mortage by a bank (but since they only guaranteed it for 3 months, it long expired). This time around, with the current tricky financial situation, I'm not sure I would be so easily approved. If I don't get approved, can I walk away from my condo without having to pay any sort of penality? Or do they keep my down-payment?

Can you provide more information? - I am a bit confused about what you are asking.

[Table 5]

Thanks photon, appreciate the help. Considering close is in about 2 months, im sure that financing condition has long passed. I do think I will be able to get a mortgage.

I dont think I would be able to cover the entire mortage/condo fees with rent (not sure what a 600 square foot one bedroom on 1st street go for these days), but Im hoping I can atleast get rent to the point where i pay a couple hundred bucks, and over time it covers the appreciation of the place.

[Table 5]

Originally Posted by troutman

Can you provide more information? - I am a bit confused about what you are asking.

basically Im asking if i cant get a mortgage from my bank (on a place that closes in 2 months), do I get to keep my 10% deposit and walk away, or would i have to walk away forfeiting that 10%.