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Old 03-13-2021, 01:54 PM   #41
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I think Calgary houses are due for an increase in price. However, like always it's location, location and location that will probably decide the rate of increase. Right now I'm told that the average estimated value to use is about $50,000. above the city property assessment.

For Calgary in particular, I think it's the recent rise in oil prices that are starting to give a renewed sense of hope that is the dominant factor affecting our real estate. However, in general, it's a large number of factors, all coming together, that is feeding the Canadian market, e.g.:

1. Low interest rates
2. Ease of borrowing
3. Rising material and labor costs
4. Large amount money injected into the economy
5. Currency devaluation
6. Anticipated inflation
7. Optimism with the vaccines, easing pandemic, and anticipated return to normal
8 Etc.

However, IMO the situation is not without risk, and could change. The oil price could drop, and stay low because the US oil shale play heats up and the Saudis increase production. Or interest rates could increase along with inflation, and if the economy cools off we could end up with stagflation.

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Old 03-13-2021, 02:50 PM   #42
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Do people have to introduce politics into every forum? I don’t give a nhit about Nenshi, especially since the exodus to the suburbs is the trend in most markets.
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Old 03-13-2021, 03:08 PM   #43
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Definitely seems like a sellers market where I am (Portland). We were looking into taking advantage of the really low rates to get into our first house, but prices have exploded in the last year. We're talking $400k US for a 902 sq ft 2 bd/1 ba house. Can't fathom spending that on a place only 150 sq ft larger than what we are in. Looks like we'll be staying in our small apartment for another year, since even rentals are getting absurd. (minimum $1600/mth for anything larger than what we're in). The one small positive of the pandemic is my state halted all rent increases for current tenants, so at least our current rent has stayed flat for a couple of years.
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Old 03-13-2021, 03:46 PM   #44
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So many Canadians have 0 wiggle room if interest rates significantly rise. I think the Feds won't let it happen as it would cause the economy to melt down.
They stress test at 5% or 2.5%(I think) above the posted rate which ever is lower.

So there is some room to move up but like the eighties
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Old 03-13-2021, 03:47 PM   #45
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I think when I decide to sell one of my houses rather than do a list or ask price, I'll post a price 200 k less than assessment and say bidding starts at this. Not sure what else you can say is listed for 350 but refuse to take 355 for in an offer.

Seems like its better to intentionally sand bag the list price and eventually some will get carried away and overpay than ask what it was worth in the first place. Imagine going to a car dealership and offering 40 grand for a car listed at 35 and the dealer saying...no I was hoping for 42.
Wouldn't it just be better to put it on the market without a price, assuming that is allowed, and put in the listing that offers will be accepted until X date at which point all offers will be reviewed and considered?
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Old 03-13-2021, 04:08 PM   #46
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i am really hoping for the condo market to pick up again. Doubtful it happens anytime soon.
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Old 03-13-2021, 04:13 PM   #47
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One good month in 7 years is a bubble?
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Old 03-13-2021, 04:25 PM   #48
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I tried to sell a condo that I've had for 12 years, in August.
I ended up dropping the price about $25,000 from where I started, to the point that I would have come out with $0 after paying mortgage penalty/closing costs. I eventually just took it off the market completely. My realtor basically told me I would have had to drop another $10-15,000. Basically I would have been selling for $90,000 less than I bought.

Instead, I'm paying $600/month for someone else to live there. **** Calgary's real estate market.
I'm in that exact same situation, though I'm only losing $300/mo renting it out. The only bright spot is right now I'm seeing similar units in our building being listed for $240k'ish, compared to when I tried to sell at $219k last year. I'm hoping all the talk yet another bubble is more horse#### and things continue to go up, so next year I can sell and get at least a little something out of the place

I really wish I didn't listen to all of my family members who stressed and stressed that I should buy instead of rent, condos are such a terrible investment. I will make sure that my daughters do not make that same mistake

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Old 03-13-2021, 04:37 PM   #49
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One good month in 7 years is a bubble?
Start of a new bubble? Seems like everytime there’s a real estate thread there’s bubble talk. The market is overextended, a major correction is around the corner, this can’t continue, home prices aren’t in line with wages etc etc.
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Old 03-13-2021, 04:53 PM   #50
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Nm

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Old 03-13-2021, 05:19 PM   #51
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Start of a new bubble? Seems like everytime there’s a real estate thread there’s bubble talk. The market is overextended, a major correction is around the corner, this can’t continue, home prices aren’t in line with wages etc etc.
The better question is are mortgage payments in line with wages.

The median family income in Calgary is 102k in 2018. The median detached SFH is 466k.

(There is a huge assumption here by using median SFH and Median family as opposed to average or including all dwellings or looking at individual income but I think this comparison makes sense if looking at the SFH market)

A 25 yr mortgage of 466k at 2.34% has a monthly payment of 2050 plus say 250 in taxes or so for a total of 2300 per month which is 27600 per year or about 27% of income. The recommended max is 30-32%.

So in Calgary, at current interest rate the median family can afford the median SFH therefore no bubble. Now if interest rates rise to 5% the payments and tax come out to 35.5k which is 34.8% of gross income so may put stress on a house hold.

Calling Calgary a bubble or even at high risk if interest rates rise doesn’t seem backed by evidence. Commodity price volatility and oil industry employment is the far bigger risk to Calgary housing prices.
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Old 03-13-2021, 05:21 PM   #52
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Calgary one of the most affordable? Rbc economics thinks so:

https://www.google.ca/amp/s/calgaryh...75b9fafe1/amp/

Calgary’s real estate market is again one of the most affordable in Canada, according to a recent report.

RBC Economics released its housing risk monitor survey earlier this month, showing the city fared best among major centres in Canada regarding affordability and resale market balance.

“Affordability is not one of the problems for the Calgary market,” says Robert Hogue, senior economist at RBC.

The city received a green-light indicator in RBC in the report, which notes the price of homes is not a challenge for Calgary buyers — unlike Canada overall, which received a red-light indicator. The warning signal regarding national affordability is being driven by Toronto and Vancouver, both of which received the same red-light indicator in the bank’s monitoring report.

Still, Hogue notes the Calgary’s market is heating up after years of slower sales and declining prices.

“Market conditions are firming, but they are not as tight as they are in other places around Canada,” he says.

The city’s resale market also received a green-light indicator, noting it now favours sellers with increasing prices and supply levels coming down from much higher levels over the past few years following oil declines that began in late 2014.

Among the areas of concern for the city, however, is migration.

“Calgary had some issues with population flows for a bit after 2015 and 2016,” he says. “Now COVID delivered yet another blow.”

The city received a red-light indicator for the demographics risk metric in RBC’s monitor report.

Overall, the market remains in the best shape among major markets, Hogue says. “The housing market is pretty stable.”
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Old 03-13-2021, 05:24 PM   #53
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The better question is are mortgage payments in line with wages.

The median family income in Calgary is 102k in 2018. The median detached SFH is 466k.

(There is a huge assumption here by using median SFH and Median family as opposed to average or including all dwellings or looking at individual income but I think this comparison makes sense if looking at the SFH market)

A 25 yr mortgage of 466k at 2.34% has a monthly payment of 2050 plus say 250 in taxes or so for a total of 2300 per month which is 27600 per year or about 27% of income. The recommended max is 30-32%.

So in Calgary, at current interest rate the median family can afford the median SFH therefore no bubble. Now if interest rates rise to 5% the payments and tax come out to 35.5k which is 34.8% of gross income so may put stress on a house hold.

Calling Calgary a bubble or even at high risk if interest rates rise doesn’t seem backed by evidence. Commodity price volatility and oil industry employment is the far bigger risk to Calgary housing prices.
Great post. Curious where you got the 30-32% recommended max? Economist or bank standard?

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Old 03-13-2021, 05:52 PM   #54
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I can understand that. But I also would have a hard time renting for the next 10 years and having nothing to show for all that rent I paid out. So it can go both ways.
Having nothing to show for 10 years of renting isn’t quite accurate.

The renter had optionality every year. Which is hard to show and see, but it certainly exists, albeit at some cost.

But for some, having options is worth the cost.
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Old 03-13-2021, 06:17 PM   #55
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Having nothing to show for 10 years of renting isn’t quite accurate.

The renter had optionality every year. Which is hard to show and see, but it certainly exists, albeit at some cost.

But for some, having options is worth the cost.
And their landlord had the option to evict them.

Renting is great for young people. I can't imagine anyone with a family thinking it's a good option. The other major downsides:

-rent goes up over time.
-you have to pay rent your whole life, even after retirement.
-landlords rarely do proper upkeep.
-unless your renting a whole house, expect lousy and close neighbors.
-increased moving costs.

Calgary is a bit of unique market in Canada, in that the boom/shortage during the last oil boom was so extreme. However in most markets the value of property has gone up substantially over the last ten years, as has rents. Off an initial investment of $60k my rental property now clears $300/month and adds another $500/month towards capital payments. This is 10 years after purchase. It's also increased in value by $200k.
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Old 03-13-2021, 06:37 PM   #56
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I have a family and I rent, it’s fantastic. I wouldn’t consider owning at this point in time nor do I foresee that opinion changing in the near future either.
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Old 03-13-2021, 07:00 PM   #57
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And their landlord had the option to evict them.

Renting is great for young people. I can't imagine anyone with a family thinking it's a good option. The other major downsides:

-rent goes up over time.
-you have to pay rent your whole life, even after retirement.
-landlords rarely do proper upkeep.
-unless your renting a whole house, expect lousy and close neighbors.
-increased moving costs.

Calgary is a bit of unique market in Canada, in that the boom/shortage during the last oil boom was so extreme. However in most markets the value of property has gone up substantially over the last ten years, as has rents. Off an initial investment of $60k my rental property now clears $300/month and adds another $500/month towards capital payments. This is 10 years after purchase. It's also increased in value by $200k.

Assume someone owns a house with a value of $500k and they sell the house, how much does it cost them in transaction costs to move?

What if they've bought and sold two houses? How much did they fork over in realtor fees, lawyer fees, mortgage discharge fees etc each time? Why does no one ever talk about that when they sell a house? It's a huge amount of money that disappears into thin air.

If I rent a house and the house needs a new furnace or roof, should I be kicking myself that I don't get to fork over the $5-10k rather than telling the landlord and having them do it?

I rented a house that suddenly had substantial water damage in the basement. It came out of nowhere. My landlord spent a lot of money and time fixing that mess. Glad it wasn't me.

Property taxes are also a fun thing to pay. Those don't usually go down long term, do they?

There are also different rental situations. Renting a house is different than renting in a brand new, upscale, professionially managed apartment building. Landlord is never going to sell your place there. I live in such a building. I never hear my neighbours, but growing up in my families' SFH, the neighbours behind me had kids from hell that screamed at the top of their lungs all summer long, ruining life for us. No one mentions about how you can't have terrible neighbours if you own a house?

"Increased moving costs"? Hard to know how to respond to that. Renting a uhaul and buying pizza and beer for some friends or relatives doesn't cost very much.

Outside of getting lucky by buying at the right time in parts of of Vancouver and Toronto, investing in index ETFs on questrade once a year with excess money after rent is paid makes renters come out waaaaaaaay ahead of buyers from a financial standpoint. The U.S stock market has an annual return of about 10-11% over the last century. Buy a U.S market etf. That's all it takes. No skill required. Has anyone's house in Calgary increased in value annually by 10% every year they've owned it?

Again, it's not all about the financial standpoint, it can't be, otherwise no one would buy a house after doing the math of renting+investing vs buying.

On the flip side, owning provides a level of stability that sometimes can't be found renting. It also allows people to have more control over their property to make changes and presents the possibility of capital appreciation if the value of the home rises. For many, it provides peace of mind to rent their house from the bank for 30 years before they own it.

The rent vs own arguement is way more nuanced. Each side usually tends to leave out the arguments that are detrimental to their position. It always depends on ones own comfort levels and priorities in life. I think buying is crazy, but that doesn't mean I'm right.

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Old 03-13-2021, 07:42 PM   #58
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I think condo prices are down because Nenshi wanted it that way. He wanted more density and about five years ago he did a major push for building up instead of out. The result is a poor supply of detached homes. He has overbuilt the condo market without the demand being there. It was simple economics that he obviously didn’t care about.

Now with covid and people wanting more space, we have a problem.
I can't remember when, but Nenshi recently mentioned he bought a condo in East Village as a rental property. It might have been March 2020 as I remember he mentioned his timing was horrible. He would have no vested interest in prices going down
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Old 03-13-2021, 08:03 PM   #59
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I love this guys daily blog... always worth the time reading as he takes a national perspective on everything from politics, to impact of policies, to oil, to investment markets, and to housing. Usually pretty darn spot on and has been for over 10 years I've followed him.
https://www.greaterfool.ca/2021/03/1...-huge-mistake/


As for the question about buying or renting? It ALWAYS comes down to the math of your particular situation. There is always an opportunity cost associated with using your cash to buy a house (ie lost investment in the markets, versus a single volatile commodity), versus renting where you want (ie commute time, personal time, close to amenities, etc...).

If you want some great housing deals just wait another 18-24 months IMO... by then everyone that bought big homes out in the sticks since they can WFH will be called back to the work place. By then they'll be sick of their 2xdaily 45+min drive (and associated costs), not to mention rising interest rates making them even more house poor.
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Old 03-13-2021, 10:38 PM   #60
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If you want some great housing deals just wait another 18-24 months IMO... by then everyone that bought big homes out in the sticks since they can WFH will be called back to the work place. By then they'll be sick of their 2xdaily 45+min drive (and associated costs), not to mention rising interest rates making them even more house poor.
Honestly this kinda what I’m betting on but I’m jumping in now. We’re listing our townhome in the Canyon Meadows this week, and hoping to land inner city in a slightly larger/newer townhome.

We’ve been in the burbs just over 9 years now, about 4-5 years ago the commute really starting getting to me, but we still had access to downtown amenities 5 days a week so I tolerated the need to get in the car for a cup of coffee or breakfast on the weekend.

But after a year of WFH, it’s gotten super isolating, and if we end up with a mix of in office/WFH in the coming years… I’d still rather be close to downtown.
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