Calgary Real Estate predictions?

[ken0042]

Originally Posted by moon

Maybe I have been given different financial advise than others but from the successful people that I know, owning is always preferable to renting in the long term and buying a house that you can't afford long term isn't a good idea anytime whether in a boom, bust or in between.

I'm going to use houses like mine as an example; as it's new enough and there's lots on MLS. Last summer I saw houses like mine selling for $380K. This year they are listed for $350K. I think the point was that instead of buying a house last year it would have been smarter to "throw away money" on rent for a year to buy for $30K less. Even with $1500/month rent you are still up by $12K, plus another $1500 in taxes not paid.

Yes, hindsight is 20/20, and the people who bought last year will still make money if they keep their house for another 20 years. But the time to buy would have been now and not then.

[Claeren]

Originally Posted by Burninator

Claeren I know you had mentioned earlier that you were hoping to snag a downtown condo from an owner who was desperate to sell. And from the sounds of things such a situation could arise. Even developers could start cutting their prices (instead of offering these lame incentives and loans). What sort of time line are you expecting? I ask because I am also hoping to buy a condo (preferable inner city) near the end of this year or early 2009 (or whenever the market is prime to do so). Also where do you guys follow all of this? I get most of my news here.

That is the question these days isn't it.

I think within the next 4 months, starting right now, there will be bargains to be had as those willing to cut their losses will do so to whomever happens to give them a decent offer.

So if you see something you like i would go take a look and give them an offer - it can't hurt?

However I think a lot of people are hesistant to publically price their property too low. Who wants to the guy to do it first? So i think properties seemingly over-priced could sometimes be had for a lot less with a good offer. Just where is the line between a good offer based on declining speculative pricing and an insulting offer based on opportunisim?

But i definitely think certain segments will be hit far harder then others. Condo's more than homes, suburban more than inner-city, etc.


A well built home in a good community not on the furthest edge of the city will hold its value (maybe not relative to inflation, but...) but a poorly built suburban home or condo in a less desirable new community on the furthest edges of the city will take a huge hit. Suburban condos are already falling well off of their highs. 1 bedrooms i saw priced at $285k+ last summer (like RedHaus) are now at $220k-$235k (with thousands coming onto the market rom amateur-speculators this year) and small 2 bedrooms that were peaking in the $330k-$365k range are now in the $265k-$285k range. And those prices still seem high relative to rents (which are falling as fast as prices which is a bad sign).

Downtown luxury units might take the biggest hit, but the problem there is that a $600k unit might drop in true value to $400k, but most would not sell unless they really had to and $400k is still a lot of money. But there are thousands of those units coming to market too, and just one look at Arriva shows how well they are selling.


I am NOT trying to make it sound all doom and gloom. There will be opportunities for buyers finally, and some sellers/speculators who were not careful will take a hit. But as long as the job market stays healthy we in Alberta should have a soft landing.

And in a soft landing scenario, it just means there is finally no rush to buy and that you can seek out a good value. If you are experiencing income growth and have a workable and affordable living arrangement then i would just keep saving up with an eye on what is out there. I am thinking next summer for myself, when the 10,000 units under construction hit the market - but with single family housing falling further i might go that route sooner (as it will recover faster then condos). I do think i will save ~10% just in inflation by waiting 'til next year, and even more once i factor in that I am earning more then inflation on my savings (as long as that doesn't change).




(And virtually all of my posts are comparing people like my peers, who have all come of age during this boom and who have had to make very real decisions about buying v. selling not 5 years ago, but now and over the past ~2 years. If you bought before that because you are a few years ahead, then good for you - you are in a win-win situation. Either way you can use equity in your house to buy other houses/investments, etc. But for the rest of us, the decision is not so simple. Unless ready to buy at 20 while in university, our only choice was mid-boom or post-boom (without knowing where one starts and the other begins). No pre-boom choice available.)




Claeren.

[moon]

Originally Posted by ken0042

I'm going to use houses like mine as an example; as it's new enough and there's lots on MLS. Last summer I saw houses like mine selling for $380K. This year they are listed for $350K. I think the point was that instead of buying a house last year it would have been smarter to "throw away money" on rent for a year to buy for $30K less. Even with $1500/month rent you are still up by $12K, plus another $1500 in taxes not paid.

Yes, hindsight is 20/20, and the people who bought last year will still make money if they keep their house for another 20 years. But the time to buy would have been now and not then.

Originally Posted by Claeren

"Long term" is not a very specific term, but if this market tops out the way it is looking to be topping it out and you were one of those buying at the top of the market last summer, then the 'long term' necessary to have been better buying than renting is VERY long term.

Outside of purchasing at the top of the bubble, i do agree though, it is generally better to buy then rent. The problem of course is that we have just gone through a major bubble in pricing so...

I realize that there are better times to buy than others and hindsight obviously shows us that waiting could have made more financial sense in some cases.

I guess it seems you could have this type of mentality forever then and always be waiting for a drop off in prices. At some point you have to bite the bullet. Since there are no guarantees that prices will drop/rise/stabalize its seems a little odd to be blaming the housing market for people's situation in buying houses and being in debt.

I know plenty of people who bought in that same time frame and are not in trouble because they did not overextend themselves and planned for anything that might have happened.

Perhaps because I already own my home and do not have these worries it is easier for me to be less sympathetic, but it does seem that lately everyone feels that they have some right to buy a house for $1,000 and sell it off for 1 million. Sure in buying a house you don't want to end up losing money but if you make sure that you are buying quality than you are most likely going to end up positive at the end of the day.

Again perhaps it is seeing people with this flipping mentality and the idea that they are all going to make millions with little work and then whinning when that doesn't happen that has jaded me to the whole complaints about real estate issue at all.

Anyways it seems that there are others with much more specific knowledge about this anyways so I will get off my tiny little soapbox and allow those others to get back to their graphs, numbers, percentages and whatnot to argue over the real estate climate in a city in which I don't even live.

As for "affording" what they purchased. Yes, by stretching young professional-type power-couple friends were able to buy their suburban dream homes. Of course they were willing to stretch because they hoped or were told that the price appreciation would take the long term pressure off and make it all worth while - and that inversely, if they didn't stretch now they would be priced out of the market 'FOREVER'. When that $440,000 starter home or $310,000 560sq-ft condo drops even a few precent in value, all the sudden they are stretching for nothing. Even this coming year, where prices should stay flat, that means a ~4%+ drop relative to inflation.

[Frequitude]

I love this thread.

Any advice on the following situation would be awesome.

I bought a 1000ft^2 2-bedroom townhouse style condo end unit in Glamorgan in the summer of 2006 for around $240,000. It's old (1970), but I got it for the same price as newer 700ft^2 apartment style condos. It made sense to me to take the hit in age for more space, 2 floors, unfinished basement for storage, small back "yard" with a deck, and private entrance...instead of some place you go through a security door, up an elevator, down a hall, and have people living above, below and on both sides. Know what I'm saying? There's one currently on the market for $290,000 but I know that's too high.

Well I've moved in with my girlfriend and have been renting it out since November. Rental lease is up Nov.1, 2008. Rent/month is great (started at rental rate peak), and it covers expenses by a couple hundred bucks (breakeven if you consider principle an "expense" in terms of cash flow).

Where do you see this type of place fitting in this market? IMO it's a great entry level place for a younger couple or small family who value space/usefullness over newness. But that's just me.

What I should do with the place when the rental lease is up. Sell? Try to extend lease at same rent?

'ppreciate the time.

[corporatejay]

Claeren,

What really bothers me is the people who are flipping and artificially inflating the market. Amateur speculators who are nothing more than leeches.

But let me ask you this,

do you not think that there is some benefit to cost certainty and long term planning. I purchased a house last summer than I plan on living in for several years. In the long term I figure this will benefit me, and for at least the next 5 years I have an idea of what my mortgage payments are going to be.

Then I hear people complain that their rent has doubled in the past two years and that landlords are gouging, isnt' one of the benefits of owning the idea that you don't have to worry.

I think at the end of the day it's about buying a home you can afford. If you own a place that you bought for 350 and it's now worth 300...does that really matter if you don't intend to move for 5-10 years? As long as you can afford what you have that's what matters most. Keep in mind I am merely referring to primary residences and not investment properties.

[Top Shelf]

What really bothers me is realtors, developers, really anyone who has a vested interest in maintaining artificially high house prices. I started doing research a few months ago and doing some reading on some different blogs.

One thing I have learned is to always follow the money. If someone is telling you something, or making a prediction on where house prices, or anything for that matter, are going to be, I now ask my self, Why are they saying that? It goes for both people saying there are going to be price increases and people saying we are in for another bust ala 1980's style. Follow the money...

Like seriously, whenever I read something (aside from todays article in the Herald) from anyone in the Real Estate business, it is ALWAYS a good time to buy. They spin and spin, and pump the market with no concern for long term sustainability.

Anyways, that is my rant on the industry. We sold our townhouse a few weeks ago and negotiated a long possession. With the amount of listings, hopefully we can take our time and find something that is going to fit our family for the next 10+ years.

If I was a first time home buyer though, I would be licking my chops. Rent for another year and you will see some serious drops, especially in the condos.

Should be interesting to see how the next few months play out. I can't believe how much inventory there is out there. Also, when the media starts reporting on dropping house prices, as they did today, how much does that affect the psychology of buyers and sellers? Especially with the way things are playing out in the States right now.

[taco.vidal]

Im surprised there hasnt been more commentary on this subject.

[taco.vidal]

Housing boom 'officially over'

It's time for Canadians to bid the housing boom farewell as data for the first quarter of the year, released Thursday by the Canadian Real Estate Association (CREA), showed a 13 per cent tumble in existing home sales year-to-date.

[Claeren]

So Calgary sales are down 35%?

(In what are the traditionally busiest months)

And listings are growing at 10%+ per month?

(With ~10,000+ condo units yet to be taken possession of?)


Wow...



The one thing is that new single family home (SFH) home building is down something like 50% already, so they are adjusting quickly. Multi-family though just had a record month (over some pretty insane months last year) and is up (i believe) something like 23% over last March. So that is where the real glut will be.

I don't see SFH prices dropping (outside of maybe the furthest suburbs), but condo's, especailly suburban and/or woodframe condos, have seen and will continue to see price softness (relative inflation) for likely a decade IMO. Builders HAVE to build them to get their community density up (units per acre, or UPA) high enough to be allowed to build the more lucrative SFH's. You are essentially doing them a favour by buying them at a profit, so they will keep building them as long as there is a market for SFH - which is a market they can more easily restrict to just meet demand without excess supply.






Claeren.

[photon]

Some historical #'s here:

http://www.bobtruman.com/Old_Criteria/page_1510919.html

I wish that one went back a little further, while sales are down a lot, they aren't abysmal and would like to compare them to pre 2005 levels.

[troutman]

I think things are heating up - opened a lot of files this week.

[Winsor_Pilates]

I think the next few months will be a good time to buy a Calgary condo. Things are really slow right now and developer's may get desperate. None of our projects are selling well, and people are starting to look for answers.
I think some smaller or newer developers who need to make sales to meet financing, will drop their prices in desperation.

[Kjesse]

Originally Posted by corporatejay

Claeren,

What really bothers me is the people who are flipping and artificially inflating the market. Amateur speculators who are nothing more than leeches.

They aren't leeches. They are at risk, and might win or lose. They might be dumb, they might be smart. But as long as they put their money and/or credit on the line, so be it, its not any different from playing the stock market.

There are some confusing signs out there.

Things have heated up in the condo market in the last month or two, on a macro level, judging from the mood of some major condo developers for whom I do some work.

At the same time I have 2 friends who have had properties on the MLS for in excess of 160 days without any serious offers (well.... 90+, and then relist....).

The market is sorting out the good property from the bad.

Speculators are trying to liquidate.

With $115 oil, this is a hard call.

[Kjesse]

Originally Posted by Winsor_Pilates

I think some smaller or newer developers who need to make sales to meet financing, will drop their prices in desperation.

Absolutely. Despite confusing signs, those with the wherewithal to stick it out and not panic will make it. But if your banker is breathing down your neck, the next several months will be tough.

[Burninator]

I've been looking at some places recently so I thought I would bump this thread.

It's clearly a buyers market right now. Tons of inventory and lots of flexibility in prices. Heck, one building I am interested in has 25 units for sale right and the prices have been reduced more than once on some units. Where does everyone see the market going? Is it going to stay the same, get worse, get better? And when?

I'll be a first time home owner so I don't really have a timeline (meaning I'm not getting kicked out of my place and I don't play rent), but I would like to capitalize on the market to my advantage. So is it better to buy soon? Or keep saving my down payment for another...(3 months, 6 months, longer)?

[Winsor_Pilates]

Originally Posted by Burninator

I've been looking at some places recently so I thought I would bump this thread.

It's clearly a buyers market right now. Tons of inventory and lots of flexibility in prices. Heck, one building I am interested in has 25 units for sale right and the prices have been reduced more than once on some units. Where does everyone see the market going? Is it going to stay the same, get worse, get better? And when?

I'll be a first time home owner so I don't really have a timeline (meaning I'm not getting kicked out of my place and I don't play rent), but I would like to capitalize on the market to my advantage. So is it better to buy soon? Or keep saving my down payment for another...(3 months, 6 months, longer)?

I think the Calgary market will still go down a bit, so I would wait. The next few months are generally good for real estate, so atleast wait until around Decemeber-January when the slow season is back.

Are you looking at finished product, or pre-sales that will take time to build?
If you're looking at finished product, I'd build up the downpayment for a bit, as I don't think prices will increase anytime soon. If it's presale, and will take a couple of years to build, look for a good deposit structure, and reputable developer.
If you're looking at pre-sale send me a PM if you want info on what we have selling in Calgary or opinions on certain developers.

[burn_this_city]

Wait another 6-12 months. I've been watching things closely for 2 years now and I still believe there is another measurable decrease on the horizon. I'm glad someone bumped this thread, we can all see who was on to something a year ago when this thread first appeared.

[Sylvanfan]

You're in a really good position and I think you can afford to be very choosy. If you see something you like you can loffer a lot less than the listing price. Just get a plan and stick to it, and don't let your emotions mess you up! Keep a close watch on the market because it won't just pick up and come back over night, there will be a recovery period before it starts moving the other way again. If you're watching it closely and you have the ability to move at any time you will be able to avoid missing out on the really good buying oppurtunities.

I went to look at places the other day and my wife got emotionally attached to a place we really can't afford. Now I'm the worst man on earth because I cant' singlehandely afford the only place in town she doesn't hate! But I'm looking in a very different market than Calgary so my situation and your's are very different just because the markets are very different.

[The Yen Man]

On an OT note, did anyone else buy in at Gateway Midtown? That project is now suspended (I'm assuming indefinitely). I kind of saw it coming though, seeing as when I bought into the project in 2005, it seemed cheaper than comparable condos. Now other projects that started up at the same time are either complete or near completion, and GM is still building the parkade. Oh well, I guess I'll have to see how this will play out.

[Claeren]

Go back and re-read my posts in this thread -- I have been DEAD ON so far....


Prices are going to keep dropping.

Single Family Homes will bottom out before Condos.

Urban/Established Neighbourhoods will bottom out before Suburban Areas.

Faux Luxury Condos will drop further than well constructed and well priced condos without the faux luxury taglines (OMG GRANITE COUNTERS!? $400,000/500sq-ft IS CHEAP!).

Faux Luxury '$475,000-$650,000 McMansions' will drop a lot more than established older homes and/or entry level homes.


The elimination of zero down and 40 year mortgages, along with general tightening of lending practices, is going to take another 5%+ off prices (up to 20%?).

Higher interest rates in 2009 and 2010 will take another 5%+ off pricing OR higher inflation will wipe away 5%-15%/year in home value.



So if you want a house you will have to be more on top of things but if you want a condo wait as long as you can? Maybe a year or more?

The one thing about shopping right now is that there has been a 'hidden home price drop' in Calgary/Alberta where prices have held up but only the best properties sell. So you are getting larger homes and/or higher quality for the same price (well actually about 8% less already before inflation) as you were buying crap for at the height of the boom. So if you do have to buy that makes it more tolorable?

Of course your current living costs also come into play in terms of when you should buy.

Renters are making out REALLY well right now though. Landlords are often not only subsidizing the rent/carrying costs by a thousand or more a month but are also losing thousands per month in lost home value.


And don't be fooled by any small up-ticks in home prices (next spring maybe?). Just because a bunch of people THINK that the bottom has been hit does not mean it has. There is no reason for a city like Calgary to have some of the most expensive homes in North America. Oil and gas cities much bigger than Calgary like Dallas or Houston offer houses twice the size for half (or less) the money (and dropping!).


(One thing I always say though is that homes prices tend to stagnate and be sucked down by inflation more so than they tend to drop. With a healthy job market in Calgary outright drops will not be as prominent. Of course job losses could change that and we are already seeing that with growing layoffs in construction - construction being the real premium driver of the economy over the past 10 years. I could see this trend gaining steam and then prices have more room to fall with less support for a good ways down... )



Claeren