Calgary Real Estate predictions?

[Danijam]

Originally Posted by Winsor_Pilates

Actually as the market has slowed down this year, it's the high end, luxery homes that have been selling the best.

Hmm... I wonder if that will stay the same once interest rates rise.

[chemgear]

Originally Posted by Realtor 1

As mentioned above, it is funny to think that home sales in the 1 million plus range have been the strongest during the slower times.

I think several pages back I linked a page from Mike Fotiou - he did an analysis about how the high-end luxury market is pseudo independent/disconnected from the rest of the market. They're not really a good indicator of the overall market conditions according to him.

http://calgaryrealestatereview.com/2...et-conditions/

I guess it's not hard to be the "stronger" part of the market when sales volumes are the (second?) lowest in a decade.

[Winsor_Pilates]

Canadian Economic Indicators Rise in November

[pepper24]

Originally Posted by AFireInside

How do we even know this since 35 year mortgages and these higher prices have only been around for a couple years.

It's much easier to pay off a house early if you only paid 185,000 for it....

I have a VERY hard time seeing many of those who bought houses with a 40 year 0 down mortgage paying anything off early. A few years, sure... They may pay it off in 32 years doing bi weekly payments or something, like that, but thats still 32 years.

Well said. That stat probably held up when houses were at reasonable prices to debt/income and amortization periods were at 25 years or less. I suspect those percentages will be much lower with 5/35 mortgage terms. I guess our kids will have to debate about that on CP at that time!!

[pepper24]

Originally Posted by Danijam

Hmm... I wonder if that will stay the same once interest rates rise.

Good question....I think that the most vulnerable home owners from higher interest rates will be the younger demographic that probably wouldn't have been home owners at historical rates (6-7%) but were able to get into the market due to record low interest rates and wacky products like 0/40 and 5/35 term mortages. They'll have no home equity and have trouble with the increased mortgage payments (assuming lenders will qualify them again) on top of high consumer debt.

I think you'll see areas like the deep suburbs and condo market where this is a high demograpic take the largest hit. We're probably already seeing this which is why the high end luxury homes are doing the best.

[fundmark19]

I think that alot of people are missing the simple fact on why some people chose the 35 yr 5 down route. I had the choice to put 5 or 10 percent down on my first condo. I was going to live in it and then rent it out after that. It did not make any sense for me to put more of my own money into something I was not going to be paying for over the long period. The CMHC fees were not much different between 5 and 10 percent down so you don't gain on that side of things either. With the 35 yr amortization I am able to have more flexibility on my income on the rental property where if I chose a standard 25 yr my rent would be much higher and I would probably have a hard time getting renters. Now I can start at a higher price and negotiate if need be.

For my second home I also did 5 down with 35 years because I am taking advantage of the low interest rates and just increased my monthly payments from the start to what a 25 year mtg would normally be. This way I am still paying my mtg down but if prime goes up I am allready prepared for the higher payments and if something in my life happens where I need that extra 300ish a month I am able to adjust for that.

[macker]

Originally Posted by Danijam

Hmm... I wonder if that will stay the same once interest rates rise.

Guess we will find out soon enough....Mortgage rates went up 25 BPS about a month ago and are going up another 40 BPS tonight.

[pepper24]

Originally Posted by fundmark19

I think that alot of people are missing the simple fact on why some people chose the 35 yr 5 down route. I had the choice to put 5 or 10 percent down on my first condo. I was going to live in it and then rent it out after that. It did not make any sense for me to put more of my own money into something I was not going to be paying for over the long period. The CMHC fees were not much different between 5 and 10 percent down so you don't gain on that side of things either. With the 35 yr amortization I am able to have more flexibility on my income on the rental property where if I chose a standard 25 yr my rent would be much higher and I would probably have a hard time getting renters. Now I can start at a higher price and negotiate if need be.

For my second home I also did 5 down with 35 years because I am taking advantage of the low interest rates and just increased my monthly payments from the start to what a 25 year mtg would normally be. This way I am still paying my mtg down but if prime goes up I am allready prepared for the higher payments and if something in my life happens where I need that extra 300ish a month I am able to adjust for that.

Smart that you took advantage when you did as I believe earlier this year they raised the downpayment requirements for secondary/rental properties to 20% (or somewhere around there). Not sure if the amortization period is affected or not.

Probably another reason why high end homes have fared better than lower end homes which are a high percentage of rentals.

[pepper24]

http://www.theglobeandmail.com/repor...rticle1837383/

Though interest rates aren't likely to rise until about mid-2011, policy makers are worried that too many Canadians won't be able to handle higher payments when they do. Moreover, the longer that rates stay low, the more abruptly they may need to rise to curb inflation when the economy improves.

The ratio of household debt-to-disposable income reached the highest on record in the third quarter, at 148.1 per cent, Statistics Canada said Monday, a 6.7 per cent rise in Canadian household obligations from a year ago. The ratio tops the 147.2-per-cent ratio in the United States and comes as incomes fell 1.5 per cent during the same three-month period.

148.1 is scary as I believe 20 years ago Canadians were in the low 90's. I still don't see this ending well.

[pepper24]

Originally Posted by Cowboy89

The hilarious thing about that is you know they aren't taking those Range Rovers out into the bush every weekend either. Just used to tackle the mean streets of Crowchild, Glenmore, and Deerfoot before being housed in a climate controlled garage.

It's like Suze Orman said about Americans which applies to Canadians as well...

"Americans borrowed money they didn't have to buy things they didn't need to impress people they didn't know..."

[chemgear]

Originally Posted by chemgear

This can't be a good thing:

http://www.financialpost.com/news-se...tml?id=3013137

We're worse than the Greeks AND the Americans? Seriously?

Originally Posted by pepper24

http://www.theglobeandmail.com/repor...rticle1837383/

Though interest rates aren't likely to rise until about mid-2011, policy makers are worried that too many Canadians won't be able to handle higher payments when they do. Moreover, the longer that rates stay low, the more abruptly they may need to rise to curb inflation when the economy improves.

The ratio of household debt-to-disposable income reached the highest on record in the third quarter, at 148.1 per cent, Statistics Canada said Monday, a 6.7 per cent rise in Canadian household obligations from a year ago. The ratio tops the 147.2-per-cent ratio in the United States and comes as incomes fell 1.5 per cent during the same three-month period.

148.1 is scary as I believe 20 years ago Canadians were in the low 90's. I still don't see this ending well.

To be fair, it's not exactly new - I posted the above back in May. It was 144% at the end of 2009. I believe the bulls figured it was a shift from historical fundamentals, something new (and ultimately sustainable?)

[Clarkey]

Originally Posted by fundmark19

I think that alot of people are missing the simple fact on why some people chose the 35 yr 5 down route. I had the choice to put 5 or 10 percent down on my first condo. I was going to live in it and then rent it out after that. It did not make any sense for me to put more of my own money into something I was not going to be paying for over the long period. The CMHC fees were not much different between 5 and 10 percent down so you don't gain on that side of things either. With the 35 yr amortization I am able to have more flexibility on my income on the rental property where if I chose a standard 25 yr my rent would be much higher and I would probably have a hard time getting renters. Now I can start at a higher price and negotiate if need be.

For my second home I also did 5 down with 35 years because I am taking advantage of the low interest rates and just increased my monthly payments from the start to what a 25 year mtg would normally be. This way I am still paying my mtg down but if prime goes up I am allready prepared for the higher payments and if something in my life happens where I need that extra 300ish a month I am able to adjust for that.

How does that work when you go to refinance when your term is up? Could they potentially tell you to pound sand on your rental property and not renew your mortgage?

[fundmark19]

Why would they tell you to pound sand? Why would the bank give up 200k in interest profit from a condo that's being paid regularly? The downpayment rule is to try and get rid of speculaters. Any one can buy a house live in it for 6 months then turn it into a rental with only putting 5 percent down. When your mortgage renewal comes up if you don't refinance and get more money all you do is select a new term. They don't redo a whole new mtg application for the remaining period. If you were to change lenders you would have to requalify but if you stick to the same bank for your entire mtg they could care less what your downpayment is as long as you pay it.

We are not like the states where when your first term of your mtg comes due then everything hits the fan. I think there are a lot of misconceptions about mtgs out there

[Clarkey]

Originally Posted by fundmark19

Why would they tell you to pound sand? Why would the bank give up 200k in interest profit from a condo that's being paid regularly? The downpayment rule is to try and get rid of speculaters. Any one can buy a house live in it for 6 months then turn it into a rental with only putting 5 percent down. When your mortgage renewal comes up if you don't refinance and get more money all you do is select a new term. They don't redo a whole new mtg application for the remaining period. If you were to change lenders you would have to requalify but if you stick to the same bank for your entire mtg they could care less what your downpayment is as long as you pay it.

We are not like the states where when your first term of your mtg comes due then everything hits the fan. I think there are a lot of misconceptions about mtgs out there

I've seen stories on the local news about people's mortgage terms coming up and them not getting renewed. I can't remember the specifics but it is likely due to not beind employed when the term came due or excessive credit card debt.

[bizaro86]

Originally Posted by Clarkey

How does that work when you go to refinance when your term is up? Could they potentially tell you to pound sand on your rental property and not renew your mortgage?

If he got 5% down originally, he had to buy mortgage insurance, probably from CMHC. That insurance is good for the entire length of the mortgage, and means that the bank has no risk. If he defaults, CMHC pays the bill. And the insurance is transferable.

The effect of that is that if his current lender doesn't want to renew for any reason, its easy to transfer the mortgage to a new one (get a mortgage broker) since the goverment is guaranteeing the debt. It's no risk to the bank.

[bizaro86]

Originally Posted by Clarkey

I've seen stories on the local news about people's mortgage terms coming up and them not getting renewed. I can't remember the specifics but it is likely due to not beind employed when the term came due or excessive credit card debt.

A lot of times that was with US lenders who were not doing business in Canada anymore, and wanted their money back.

[fundmark19]

Correct I have paid CMHC or Genworth on all 3 of my properties. It is a waste of money but since there was no possible way for me to come up with 20 percent at the time of getting the mtgs it was needed.

Now all I need is some renters to stay in for 35 years and im laughing!

[chemgear]

Mike Fotiou has his update on the first half of the month on his blog. Looks like the minor "surge" in pending sales dropped off as expected, as was the case in October. SFH median prices have dropped back on (past) the previous downward trend. Condos prices are up a bit with its own sales "surge" - I wonder if the numbers will get a little "wonky" with the small sample size into the holidays?

http://calgaryrealestatereview.com/2...l-estate-blog/

[Winsor_Pilates]

Originally Posted by chemgear

Mike Fotiou has his update on the first half of the month on his blog. Looks like the minor "surge" in pending sales dropped off as expected, as was the case in October. SFH median prices have dropped back on (past) the previous downward trend. Condos prices are up a bit with its own sales "surge" - I wonder if the numbers will get a little "wonky" with the small sample size into the holidays?

http://calgaryrealestatereview.com/2...l-estate-blog/

Thanks Mike

December numbers are always a little wonky; samples are too small and too many other things going on.
Condo sales being up seems like a wonky little blip to me. I don't think there will be a sustained increase in activity yet.

[1stLand]

Our office is seeing sales pick up.
If a property is priced right and is in a popular area, it is gone.

Inventory and choice seems very low at this point.
I did 3 deals in 1 day last week (2 list ends and 1 buy).

I've been out with alot of buyers and on 3 occasions a home they have short-listed has gone pending or has sold within a week.

I attribute the increase in activity to better weather, people wanting to tie up loose ends before 2011 and Christmas and people wanting to buy before their lease ends.

I am really interested to see how January shapes up.