The number of Albertans behind on their mortgages has risen dramatically in the past three years with the province sporting by far the highest rate in the country.
According to data as of June by the Canadian Bankers Association, there were a total of 500,429 mortgages in Alberta, through banks belonging to the association, and 3,707 of those, or 0.74 per cent, were considered to be in arrears of three or more months.
In June 2007, only 0.14 per cent (659) of a total of 458,044 were in arrears. By contrast, the CBA data shows that across the country 0.42 per cent, or 17,090, of mortgages were in arrears of a total of just over four million in June of this year.
I'm not disagreeing that Canadians are in debt (and many are in too much debt). I just wonder if the "most telling" question is about what people would do if they won the lottery though. To me that just shows that people are prudent. It doesn't mean that they would spend all of the $1 Million paying off debt. In other words if the question is "What would you do with $100 million?" the answer of "pay debt" would still be there.
It doesn't mean that people have $100 Million in debts though, its just that paying debts is a high priority for people, and there is no harm in that mindset.
I disagree. If 6/10 Canadians weren't living paycheque to paycheque then popular answers would be "share with immediate family", "give portion to charity", "travel", "take a break from work" or "invest properly".
The timing is also interesting. A few years ago when house prices were going up at unstainable rates, the answer would be much different like "buy a bigger house because real estate is a super wicked investment and will never fall in value. This time is different!" You are giving people the benefit of the doubt that they are prudent with their money which isn't the case, hence 6/10 Canadians living paycheque to paycheque. A good portion are trying to keep up with the Jones' finally realizing that the Jones' are deeply in debt.
When you're in debt and see no way out then Freedom 6/49 is the motto, not Freedom 55.
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I am 26 and I can't believe the amount of people around my age that go on 2 exotic trips a year.
People still in school mind you, saddled with huge student debt, or just entering the workforce.
Not sure where they get the money to pay for these things, but kudo's to them if they are working hard and not financing these trips with credit cards, student loans or lines of credit.
Not sure how long this party can last, but one thing is for sure, everyone needs to start living within their means, young and old.
I think Media has a lot to do with unsustainable consumerism.
How many television programs or magazines do we read, advertising a lifestyle we aspire to acheive?
Well, with cheap and easy credit, those unsustainable lifestyles are far too easy to buy, rather than achieve.
Last edited by 1stLand; 09-13-2010 at 08:13 PM.
Reason: idea
A good portion are trying to keep up with the Jones' finally realizing that the Jones' are deeply in debt.
When you're in debt and see no way out then Freedom 6/49 is the motto, not Freedom 55.
Freedom 35 FTW!
I found that during my time in Calgary (2000-2008) it became very "keeping up with the Joneses". Gotta have the new house in a new suburb, gotta have two new cars (one sport ute, one beemer), gotta go to Mexico in the winter, etc. It certainly could be a wider phenomenon, but I think Calgary in particular during that time offered young-ish people more money than their brains could manage, and those who weren't at the pinnacle of the financial heap dug some big holes trying appear that they were. Personally, I think this competitiveness is a bigger factor than what the media feeds us.
Was gonna post that. I'm expecting the Fall to be a lot busier in Van than the summer was and I think there's some merit to that report.
A lot of buyers I met in the summer were wanting to buy something, but felt like they could wait forever and had too much to choose from.
Spring & Fall are the usual seasons for bringing new developments to market as well and almost all developers are holding off this Fall because of the slow summer. This should reduce some of the inventory on the market, on top of reduced listings in the re-sale market.
My company is only opening 1 new development in all of BC, and we usually open 3-6 each Fall.
Thus, I'm coming to Calgary to sell instead!
I don't see how Real Estate tests any new highs in the next 10-20 years. Like I said years ago on cpuck, it is a structual problem just like Japan faced 20 years ago. The baby boomers are in the process of peaking in their earnings (and spending) and when they start trying to live off of those savings (which for almost all baby boomers means their home which is actually more debt than it is savings) it will suck momentum out of the market year after year after year. With less and less people looking to spend, there is less people looking to leverage money, which in turn spirals down the entire economic chain...
Calgary, and other western/pacific coast cities in both Canada and the USA, should hold up better than eastern cities due to their younger populations, influx of young migrant/immigrant workers, and their proximity to Asia (and their massive bubble of young people working their way up the spending curve) but it will mean less down-side to the market IMO, not long term upside.
I can rent anything I want in the market right now for a fraction of its total carrying cost. That is a pretty simple metric that should tell anyone all they need to know...
Claeren.
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Was gonna post that. I'm expecting the Fall to be a lot busier in Van than the summer was and I think there's some merit to that report.
A lot of buyers I met in the summer were wanting to buy something, but felt like they could wait forever and had too much to choose from.
Spring & Fall are the usual seasons for bringing new developments to market as well and almost all developers are holding off this Fall because of the slow summer. This should reduce some of the inventory on the market, on top of reduced listings in the re-sale market.
My company is only opening 1 new development in all of BC, and we usually open 3-6 each Fall.
Thus, I'm coming to Calgary to sell instead!
I'm a little confused from those numbers/news clip though. Last I saw, inventory was sitting something like 6-7 months worth - is that not a "buyers market?" A month later the BC realtor/real estate board is saying it's not the case? So they sold/seller pulled thousands of listings to get back down into a balanced market of "1.5 - 3 months" already? To be fair, I believe they were calling it a "balanced" market whilst inventory was 5-7+ months earlier.
EDIT:
So here are the July/August numbers from the BCREA:
Sale price 2010: 491,832 / 487,804
Sale price 2009: 463,948 / 471,078
Inventory 2010: 49,645 / 46,615
Total Sales 2010: 5784 / 5590
Months of Inventory 2010: 8.6 / 8.3
Okay, so their "prices have gone up 4%" is based on a comparison against 2009, not the 1% further drop from the previous month. Heck, you could have looked at July and said it was GREAT month because prices were up 6%!!! (ahem, from last year)
It's the new listings that are slightly down, not the overall inventory - that is still at more than 8 months. Sales numbers are down 35% from same time this year. However, I don't see this "first month to month increase since March of this year." thing - am I missing something?
Still interesting, it seems to be a very . . . selective . . . view/isolation of particular set of numbers and comparisons.
Last edited by chemgear; 09-16-2010 at 09:25 AM.
Reason: Looking up the actual numbers
I'm a little confused from those numbers/news clip though. Last I saw, inventory was sitting something like 6-7 months worth - is that not a "buyers market?" A month later the BC realtor/real estate board is saying it's not the case? So they sold/seller pulled thousands of listings to get back down into a balanced market of "1.5 - 3 months" already? To be fair, I believe they were calling it a "balanced" market whilst inventory was 5-7+ months earlier.
I think the story and RE board are jumping the gun for sure, and it's still very much a buyers market. I just think the Fall will be better for sellers than the summer was.
The news here always runs stories that either suggest an overly strong or poor market. There's no fun in stories of moderate changes.
I don't see how Real Estate tests any new highs in the next 10-20 years. Like I said years ago on cpuck, it is a structual problem just like Japan faced 20 years ago. The baby boomers are in the process of peaking in their earnings (and spending) and when they start trying to live off of those savings (which for almost all baby boomers means their home which is actually more debt than it is savings) it will suck momentum out of the market year after year after year. With less and less people looking to spend, there is less people looking to leverage money, which in turn spirals down the entire economic chain...
Interest long term forecast. If you're correct though, it seems more applicable to the economy as a whole, rather than just Real Estate values. We'll be in pretty big economic trouble in all regards.
Interest long term forecast. If you're correct though, it seems more applicable to the economy as a whole, rather than just Real Estate values. We'll be in pretty big economic trouble in all regards.
Not necessarily. Using Japan as an example, unemployment has been extremely low, productivity relatively high, quality of life fairly high, but underlying it all has been an ongoing deflation sucking the upside out of any domestic real estate investment for an entire post-(Japan)baby boomer generation.
A young Japanese person who made the error of buying 20 years ago is still underwater on that investment (as they approach retirement) and will likely never be ahead on it for their entire life. Their compatriot who did not buy is far far ahead...
I see the same thing potentially happening here. Arguably all of these retiring North American workers are going to create a massive jobs vacuum that the rest of us can fill, but will all want to downsize their real estate portfolios creating a huge over supply of homes for us to buy.
How it all interconnects is difficult at the best of times, but I just cannot see how people see upside to buying in this market.
Not necessarily. Using Japan as an example, unemployment has been extremely low, productivity relatively high, quality of life fairly high, but underlying it all has been an ongoing deflation sucking the upside out of any domestic real estate investment for an entire post-(Japan)baby boomer generation.
A young Japanese person who made the error of buying 20 years ago is still underwater on that investment (as they approach retirement) and will likely never be ahead on it for their entire life. Their compatriot who did not buy is far far ahead...
I see the same thing potentially happening here. Arguably all of these retiring North American workers are going to create a massive jobs vacuum that the rest of us can fill, but will all want to downsize their real estate portfolios creating a huge over supply of homes for us to buy.
How it all interconnects is difficult at the best of times, but I just cannot see how people see upside to buying in this market.
Claeren.
1. Japan has no immigration
2. San Francisco / America built on faulty banking/lending system
Calgary will not see such a significant drop in prices as those charts portray in Japan and San Francisco
A news report released today put Calgary as #1 in average household income in Canada at approx. $90,000 / year. Edmonton followed as the 2nd highest household income per household.
at 4x's a households income, thats $360,000 for an average house, at 5x's a households income, thats an average price of $450,000 which is closer to where Calgary is right now.
If any city in Canada is going to experience significant losses in value, its going to be Vancouver. They dont have the fundamentals to support current housing prices.
1. Japan has no immigration
2. San Francisco / America built on faulty banking/lending system
Calgary will not see such a significant drop in prices as those charts portray in Japan and San Francisco
A news report released today put Calgary as #1 in average household income in Canada at approx. $90,000 / year. Edmonton followed as the 2nd highest household income per household.
at 4x's a households income, thats $360,000 for an average house, at 5x's a households income, thats an average price of $450,000 which is closer to where Calgary is right now.
If any city in Canada is going to experience significant losses in value, its going to be Vancouver. They dont have the fundamentals to support current housing prices.
While I agree with you that you can't compare Calgary to San Fran/Japan, I completely disagree with you in your assertion that Calgary will not see a significant drop in prices. I personally don't particuliarily think there will be a huge drop but I do see a drop from current levels. After that, well it totally depends upon the economy and more importantly the price of oil and gas. There's so much uncertainty out there right now I just don't see how anyone thinks they can predict what's actually going to happen. One things for sure, should the prices of oil and gas decline and stay supressed for some time, this city could become the ghost town that it was in the early 80's.
1. Japan has no immigration
2. San Francisco / America built on faulty banking/lending system
Calgary will not see such a significant drop in prices as those charts portray in Japan and San Francisco
A news report released today put Calgary as #1 in average household income in Canada at approx. $90,000 / year. Edmonton followed as the 2nd highest household income per household.
at 4x's a households income, thats $360,000 for an average house, at 5x's a households income, thats an average price of $450,000 which is closer to where Calgary is right now.
If any city in Canada is going to experience significant losses in value, its going to be Vancouver. They dont have the fundamentals to support current housing prices.
Which is completely predicated upon the long term viability of our energy industry. I think our exports will always have a place in the world but the world as a whole is rapidly moving away from the current paradigm where structural reliance on oil and gas drives prices. Think coal industry in the NE USA, 60 years ago you would have said I was crazy to think that the world would use anything else.
Calgary (Alberta) also has no true shortage of land. Japan, Sanfran and even Vancouver (etc) have some long term issues that put a bottom in their markets completely unlike Calgary. You could double Calgary's population without moving outward at all. The only bottom in Calgary's market is the cost of materials to build new units.
If the Calgary market actually had demand for it, new builders could provide 20,000-30,000 units per year overnight. I am not sure how that is conducive to any upside. This discussion doesn't have to be about market downside -- with rents so far below carrying costs it is better to rent than buy unless there is upside.
Which is completely predicated upon the long term viability of our energy industry. I think our exports will always have a place in the world but the world as a whole is rapidly moving away from the current paradigm where structural reliance on oil and gas drives prices. Think coal industry in the NE USA, 60 years ago you would have said I was crazy to think that the world would use anything else.
Calgary (Alberta) also has no true shortage of land. Japan, Sanfran and even Vancouver (etc) have some long term issues that put a bottom in their markets completely unlike Calgary. You could double Calgary's population without moving outward at all. The only bottom in Calgary's market is the cost of materials to build new units.
If the Calgary market actually had demand for it, new builders could provide 20,000-30,000 units per year overnight. I am not sure how that is conducive to any upside. This discussion doesn't have to be about market downside -- with rents so far below carrying costs it is better to rent than buy unless there is upside.
Claeren.
I disagree.
Working for a Land Development company for two years taught me the real costs of development. Infrastructure isn't cheap, and if you think the city builds roads, sanitary and storm sewers, electrical cables, then you are sadly mistaken. These are developer responsibilities.
The farther out you go from the core, the more expensive these utilities cost.
The cost of land acquisition alone is astronimcal, as speculators have bought up parcels and acerages and driven up the price of raw land.
Developers make a handsome profit, so do homebuilders as it stands now. But if you think their profit margins are anything over 20%, you are probably wrong. Tradesman and the cost of materials have already adjusted their prices to reflect the recession and a further drop in the cost of these components is unlikely.
Couple that with the city of calgary proposed levy of $10,000 per new house built and you have a fairly high cost to build.
Therefore, new housing and new housing prices can't go down much further, and if the market doesnt support bringing on new developments or projects, developers will mothball new phases/developments and sit and wait until it comes back.
As for your comment about builders having the capacity to build 20,000 - 30,000 units per night (should there be demand).....I hope you are kidding.
There is a process developers have to follow in terms of getting subdivision approval, development approval, servicing agreements etc.
It takes over a year in some cases to bring on a new phase, more if its a new development altogether.
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A news report released today put Calgary as #1 in average household income in Canada at approx. $90,000 / year. Edmonton followed as the 2nd highest household income per household.
at 4x's a households income, thats $360,000 for an average house, at 5x's a households income, thats an average price of $450,000 which is closer to where Calgary is right now.
Unfortunately, the long term ratio has been more like 3ish range (Which I assume correlates well to the 33%ish borrowing benchmark of total income for housing costs, etc.)
When you factor in median incomes, the same historic range appears for housing prices. Housing prices for 20 years, prior to 2000, stayed in a narrow range of between 3 and 4 times provincial annual median income.
Quote:
Originally Posted by username
After that, well it totally depends upon the economy and more importantly the price of oil and gas. There's so much uncertainty out there right now I just don't see how anyone thinks they can predict what's actually going to happen. One things for sure, should the prices of oil and gas decline and stay supressed for some time, this city could become the ghost town that it was in the early 80's.
I don't think we'll be a ghost town (I hope not at least) but gas prices continue to be pretty poor. Alberta is still pretty gas "heavy" versus oil but certainly more oil is coming onstream. AECO gas prices are up slightly to $3.50 currently (it was down to $3.00 recently - down from the original $4.00 early in the year when it was originally mentioned in this thread.) US rig counts are still near historical peaks though - shale gas leases, drill 'em or lose em will keep supply brimming and prices pretty low for a good while yet.
[QUOTE=chemgear;2674088]Unfortunately, the long term ratio has been more like 3ish range (Which I assume correlates well to the 33%ish borrowing benchmark of total income for housing costs, etc.)
When you factor in median incomes, the same historic range appears for housing prices. Housing prices for 20 years, prior to 2000, stayed in a narrow range of between 3 and 4 times provincial annual median income.
/Quote]
There was a completely different philosophy 20 years ago, regarding the use of credit for the average consumer.
People more willing to go into debt to buy what they want today than they were 10, 20, 30 years ago.
I don't think 3x's or 4x's the average household income as a benchmark for housing prices is as relevant as it once was
Unfortunately, the long term ratio has been more like 3ish range (Which I assume correlates well to the 33%ish borrowing benchmark of total income for housing costs, etc.)
When you factor in median incomes, the same historic range appears for housing prices. Housing prices for 20 years, prior to 2000, stayed in a narrow range of between 3 and 4 times provincial annual median income.
/Quote]
There was a completely different philosophy 20 years ago, regarding the use of credit for the average consumer.
People more willing to go into debt to buy what they want today than they were 10, 20, 30 years ago.
I don't think 3x's or 4x's the average household income as a benchmark for housing prices is as relevant as it once was
This mentality is exactly the problem. 3 and 4 x's SHOULD be the benchmark. It's ridiculous to think anything else. There is a REASON that 3 - 4 x the median income was used over the years.
Being willing to go into massive debt to purchase a house isn't a good thing. It's a stupid thing. Yes you will have to go into to debt. But you shouldn't be house poor, and once you surpass the 4X income thats exactly what begins to happen.
That rule is definitely relevant. 30 years ago someone may have made 12 bucks an hour, and they could afford to buy a 75,000 dollar house. Today people are making 30/hr and they are buying houses that are 500,000. Those numbers don't add up.
The sooner people start getting real and using some common sense about how much debt and spending they are doing the better off we will all be.
The median income for a FAMILY in Calgary is roughly 91,000, when you factor in kids etc, there is no way, they should be purchasing a $400,000 property.
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