Calgary Real Estate predictions?

[Julio]

Hey there...remember me from back on pgs 53-54? Well after the heartache of having a conditional sale go sour in mid June, on Sept 1st our condo in Bankview sold!

[chemgear]

Originally Posted by Julio

Hey there...remember me from back on pgs 53-54? Well after the heartache of having a conditional sale go sour in mid June, on Sept 1st our condo in Bankview sold!

Nice! No issurance issues this time I assume?

Hopefully you got the same/higher price as the previous conditional sale that fell though earlier?

[Julio]

Nope...didn't dare report on anything till the $ were actually in the bank! And we actually got a very similar price (a couple thousand more actually) than back in June, which is a bit surprising/heartening considering the doom and gloom around the market right now.

[chemgear]

Originally Posted by Julio

(a couple thousand more actually)

Score! You buying drinks?

[Shazam]

Originally Posted by chemgear

But isn't the Bank of Canada essentially (semi) autonomous from the government in power? (ie. the whole government deals with fiscal policy and BoC sets monetary policy.)

With their mandate to control inflation I wonder how willing they would be to jack rates if inflation required it, in spite of the housing situation at the time. (Of course housing would be just a part of the economy that would certainly affect the inflation measurements.)

Sure.

Where's the inflation?

[Julio]

Originally Posted by chemgear

Score! You buying drinks?

Already been bought and consumed...

[1stLand]

A 20% drop in prices is not out of the question, but something drastic would have to occur, like another economic meltdown, job losses, and a significant jump in interest rates.

I have seen plenty of listings out there that have dropped in price over 20%.
Does this mean the market has come down more than 20%? More often than not it meant their initial list price was way out of whack.

I just purchased a Condo (Foreclosure) and negotiated $16,000 off the price. Between what I bought it for and what it was initially listed at this past March, there is a $40,000 spread.
If you go back further and see what it was listed at in 2007, there is almost a $100,000 spread.
Could the value of that condo go down further? Ofcourse.

As long as I can rent it when I decide not to live there anymore and have mortgage and expenses paid for with a little cash left over I am happy.

That is the philosophy many of people are adopting out there.
Many times I have left listing appointments empty handed because the value of their home is far less than their mortgage. 4 or 5 of these houses I visited have turned into Rentals, because the owners had to relocate and refused to take a $30,000 to $50,000 loss.

So for the people out there waiting for the other shoe to drop and prices to come crumbling down in excess of 20% because current home prices are 'overvalued', I advise you that people are very resistent to lose money on their homes.

Significant Job losses in the economy or drastic rise in carrying costs (interest rates) are about the only likely catalysts out there that will bring about a wholesale drop in Prices to the extent it could be referred to as "A Bubble Popping"

[AFireInside]

Originally Posted by 1stLand

A 20% drop in prices is not out of the question, but something drastic would have to occur, like another economic meltdown, job losses, and a significant jump in interest rates.

I have seen plenty of listings out there that have dropped in price over 20%.
Does this mean the market has come down more than 20%? More often than not it meant their initial list price was way out of whack.

I just purchased a Condo (Foreclosure) and negotiated $16,000 off the price. Between what I bought it for and what it was initially listed at this past March, there is a $40,000 spread.
If you go back further and see what it was listed at in 2007, there is almost a $100,000 spread.
Could the value of that condo go down further? Ofcourse.

As long as I can rent it when I decide not to live there anymore and have mortgage and expenses paid for with a little cash left over I am happy.

That is the philosophy many of people are adopting out there.
Many times I have left listing appointments empty handed because the value of their home is far less than their mortgage. 4 or 5 of these houses I visited have turned into Rentals, because the owners had to relocate and refused to take a $30,000 to $50,000 loss.

So for the people out there waiting for the other shoe to drop and prices to come crumbling down in excess of 20% because current home prices are 'overvalued', I advise you that people are very resistent to lose money on their homes.

Significant Job losses in the economy or drastic rise in carrying costs (interest rates) are about the only likely catalysts out there that will bring about a wholesale drop in Prices to the extent it could be referred to as "A Bubble Popping"

I guess the one problem I see with your opinion is that if you are going to turn your place into a rental and move somewhere else do you not need to have 20% down for your next place? 20% down is not common these days especially when the average house price is $400,000.

I agree with you that people are very resistant to lose money on their property, that's common sense. However, there are people out there who are retiring, have lost jobs, etc who purchased properties before the spike and can therefore lower their prices if they need to sell, and still make a killing on their home.

If sales are declining, and it is becoming more difficult to sell, some of these will lower their prices, and it will affect other sale prices.

Also I don't agree that something drastic such as increased unemployment levels are needed to cause housing prices to decrease. Houses are over valued, and people have spent more than ever before on their homes. I believe it was posted earlier in this thread.

Before 2000, house prices tended to hover with a narrow range of between three and four times provincial annual median income. Today, house prices are anywhere from 4.7 to 11.3 times the median income, says the report.

I guess I just can't ignore that stat.

I look at the new MLX listings everyday, several times a day. Prices are dropping out there. There was listing I just looked at, that is down over $60,000 from when it was purchased in 2007. The list price is down over 20% from what the property was purchased at. This is not a special case, the exact same unit in better shape just sold for significanly less than this unit. Meaning that this particular property could potentially sell for 25% less than it was purchased for in 2007.

Does this mean every property will decrease by this much? Absolutely not. But these situations are occurring right now. Decreased demand, increased supply, increasing interest rates (BOC at least ), all point in one direction. Add to the fact that housing prices have exceeded wage increases. It just seems to me that everything points towards a serious correction. Call it a bubble, or whatever you like.. As far as I'm concerned 15% is getting into serious correction territory..

These are the same things heard from the U.S. before their meltdown, can't happen here, it would take something drastic etc. Are prices guaranteed to decrease by a large amount, no of course not, but thats the way it looks.

Meh.. I'm getting tired of this debate at this point. Those associated with the real estate industry, and those who have recently purchased will never admit that housing prices could potentially decrease by a significant amount without an earth shattering catastrophic event causing such a decrease, I can certainly understand that position.

I dunno it's very late/early depending on who you are so this may be complete jibberish....

[1stLand]

Originally Posted by AFireInside

I guess the one problem I see with your opinion is that if you are going to turn your place into a rental and move somewhere else do you not need to have 20% down for your next place? 20% down is not common these days especially when the average house price is $400,000.

I agree with you that people are very resistant to lose money on their property, that's common sense. However, there are people out there who are retiring, have lost jobs, etc who purchased properties before the spike and can therefore lower their prices if they need to sell, and still make a killing on their home.

If sales are declining, and it is becoming more difficult to sell, some of these will lower their prices, and it will affect other sale prices.

Also I don't agree that something drastic such as increased unemployment levels are needed to cause housing prices to decrease. Houses are over valued, and people have spent more than ever before on their homes. I believe it was posted earlier in this thread.

Before 2000, house prices tended to hover with a narrow range of between three and four times provincial annual median income. Today, house prices are anywhere from 4.7 to 11.3 times the median income, says the report.

I guess I just can't ignore that stat.

I look at the new MLX listings everyday, several times a day. Prices are dropping out there. There was listing I just looked at, that is down over $60,000 from when it was purchased in 2007. The list price is down over 20% from what the property was purchased at. This is not a special case, the exact same unit in better shape just sold for significanly less than this unit. Meaning that this particular property could potentially sell for 25% less than it was purchased for in 2007.

Does this mean every property will decrease by this much? Absolutely not. But these situations are occurring right now. Decreased demand, increased supply, increasing interest rates (BOC at least ), all point in one direction. Add to the fact that housing prices have exceeded wage increases. It just seems to me that everything points towards a serious correction. Call it a bubble, or whatever you like.. As far as I'm concerned 15% is getting into serious correction territory..

These are the same things heard from the U.S. before their meltdown, can't happen here, it would take something drastic etc. Are prices guaranteed to decrease by a large amount, no of course not, but thats the way it looks.

Meh.. I'm getting tired of this debate at this point. Those associated with the real estate industry, and those who have recently purchased will never admit that housing prices could potentially decrease by a significant amount without an earth shattering catastrophic event causing such a decrease, I can certainly understand that position.

I dunno it's very late/early depending on who you are so this may be complete jibberish....

All good points.

1) As soon as you turn your primary residence into a rental property, and have a lease agreement on it, you can purchase another property (so long as you are living in it) for 5% down.
I know this because I own a house in Edmonton thats rented out, I am renting right now in Calgary, and I just purchased a condo for 5% down.

2) Yes prices have come down since 2007 in excess of 20%
What I am skeptical of, is a further drop of 20% from today's selling averages.
Some people out there have listed their home like it is still 2007 because they need to recoup their initial investmennt (downpayment) plus they dont want to take a loss on their house.
These certain few will inevitably have to take a huge loss on their home if they would like to sell in today's market.

So when I am referring to the unlikely scenario of a 20% drop, I am talking about a further drop in a home purchased today at or below current market value.

[pepper24]

Originally Posted by 1stLand

2) Yes prices have come down since 2007 in excess of 20%
What I am skeptical of, is a further drop of 20% from today's selling averages.
Some people out there have listed their home like it is still 2007 because they need to recoup their initial investmennt (downpayment) plus they dont want to take a loss on their house.
These certain few will inevitably have to take a huge loss on their home if they would like to sell in today's market.

So when I am referring to the unlikely scenario of a 20% drop, I am talking about a further drop in a home purchased today at or below current market value.

Let me first start off that it's refreshing to have a realtor that is at grips with the reality of the current real estate market. There are a lot of realtors, mortgage brokers and financial advisor on this site that are still stuck in the past longing for the good 'ol days of high commissions for little work and therefore aren't seeing things clearly.

My real estate disclosure is I see myself in my current place for 10+ years minimum and mortgage free so I have no vested interest what direction the market goes in the short to medium term. I see the facts which don't paint a pretty picture.

Your point above seems fair but I am hearing of a lot of nice homes in nice areas that have been slashed around 20% (around $100K) from initial list price and still not selling. These are homes that have been on the market since late spring/early summer. They were probably over-priced to begin with but still interesting that they are still on the market after such large drops in price. This is with record low interest rates. I think it comes down to that homes are still too expensive (ala home prices 4-11 times median income but historically are 3-4 times). This makes me think that we have some more room to drop. Whether it'll be another 20% from current sales is a fair assessment but I think we still have more pain to go over the next while.

[Shazam]

Originally Posted by pepper24

Let me first start off that it's refreshing to have a realtor that is at grips with the reality of the current real estate market. There are a lot of realtors, mortgage brokers and financial advisor on this site that are still stuck in the past longing for the good 'ol days of high commissions for little work and therefore aren't seeing things clearly.

Just who are these people? I surely haven't met one realtor that didn't say to me that the market wasn't going down. This was over three years ago.

[Frequitude]

I'm the landlord of a 2 bedroom townhouse condo in the $200k-$250k range. The previous renters were out at the end of August. I was faced with the decision of rent vs. sell.

After running the numbers I ended up renting.

I figured that the $5k in principal renting pays off is enough compensation to take on the risk of a 25% chance of a 25% market correction.

Here's hoping I'm right...

[Slava]

Originally Posted by pepper24

Let me first start off that it's refreshing to have a realtor that is at grips with the reality of the current real estate market. There are a lot of realtors, mortgage brokers and financial advisor on this site that are still stuck in the past longing for the good 'ol days of high commissions for little work and therefore aren't seeing things clearly.

Who are these financial advisors you speak of? As one on the site I just thought that there are a few things you should know. Firstly I don't make a dime in real estate, am not licensed there in any capacity. I have no idea how the real estate market not crashing is of special benefit to me (other than the economy just not crashing, which is of benefit to most people in Calgary).

Second, I have no idea what you mean by the "longing for the good 'ol days" comment as far as financial advisors. I assume that the industry is just an easy target for you and we get lumped in here with the usual attitude towards real estate agents? (That attitude being that they come and put a sign on your lawn, sell the house and make a lot of money to do nothing).

In any case, its rich that a guy who works in investment banking is going to take shots at these other professions and say that we are the ones longing for the past years of high commissions! How'd 2008 turnout for you guys again?

I'm not a guy who thinks that we are primed for another doubling of the real estate values here, but I do think that we've seen most of the damage already. Sure we could see another 5-10% down, but such is life. For someone with no plans of moving that kind of move is inconsequential.

Finally, I'll just put this forward. If there are people who are totally convinced that housing drops by 20-25% over the next couple of years you should sell your house. On a $500,000 home you could buy back in when that happens and save $100k (before fees, but nonetheless its definitely worthwhile).

[pepper24]

Originally Posted by Slava

Who are these financial advisors you speak of? As one on the site I just thought that there are a few things you should know. Firstly I don't make a dime in real estate, am not licensed there in any capacity. I have no idea how the real estate market not crashing is of special benefit to me (other than the economy just not crashing, which is of benefit to most people in Calgary).

Second, I have no idea what you mean by the "longing for the good 'ol days" comment as far as financial advisors. I assume that the industry is just an easy target for you and we get lumped in here with the usual attitude towards real estate agents? (That attitude being that they come and put a sign on your lawn, sell the house and make a lot of money to do nothing).

In any case, its rich that a guy who works in investment banking is going to take shots at these other professions and say that we are the ones longing for the past years of high commissions! How'd 2008 turnout for you guys again?

You could lump in real estate lawyers as well. Let's not kid ourselves that a few years back a realtor could list a house at last sales price for the area and in a few days get multiple offers at well over listing price. They were getting double commision for less work as house prices doubled and commision rates (7/3) remained the same. It's only natural that being paid on commision one would be resistent to having to go back to doing more work for less commmision. The people in this industry aren't bad people but their pay structure bring up serious conflicts of interest.

The last comment above you are 100% correct. Financial advsiors might be better groups under my profession than with real estate. In my industry receptionists (bottom of the totem pole) were getting $100K bonuses at the peak. Being a few notches up the pole, I miss those days to a certain degree (conflict of interest!) but even at the time was suspect of the short term thinking and greed tied behind it. The facts and my gut told me that it was unsustainable and the correction happened quicker and was more severe than I even imagined. Smart, educated people let greed cloud their thinking creating a mess that spread not just within the industry but the entire world. Everyone got hit in some form. I am happy that things now appear more normal and are better regulated but that cloud still hangs over my head. It`s best for everyone and obviously much more sustainable.

(Reminds me of Ralph Bucks in a way.......nice at the time but short-sighted as now that money would come in handy with record deficits.)

The real estate market to me doesn't sound much different but just on a more local scale. If anything it could hit people harder because homes are more personal than something like stocks. People can only own homes that are 4-11% their median incomes for so long before something has to give. The job market is improving but no where enough to cover the gap. Real estate is not sustainable at current prices.

[AFireInside]

Originally Posted by Shazam

Just who are these people? I surely haven't met one realtor that didn't say to me that the market wasn't going down. This was over three years ago.

From Creb...


The Calgary market will continue to build momentum in 2010 as the year progresses, while affordability and low interest rates will support a balanced housing market. Single family homes will show modest price increases, while the condominium price growth will lag. Smaller single family homes and lower priced segments will lead in sales and price growth.

Doesn't sound like they are saying it will decrease to me. Of course not all realtors are bad etc. There are some very good ones out there who are honest hardworking people.. There are also those who mislead people. Unfortunately those tend to be who you hear about. Of course there are still others who know nothing and just believe what CREB tells them.

[Shazam]

Originally Posted by AFireInside

From Creb...


The Calgary market will continue to build momentum in 2010 as the year progresses, while affordability and low interest rates will support a balanced housing market. Single family homes will show modest price increases, while the condominium price growth will lag. Smaller single family homes and lower priced segments will lead in sales and price growth.

Doesn't sound like they are saying it will decrease to me. Of course not all realtors are bad etc. There are some very good ones out there who are honest hardworking people.. There are also those who mislead people. Unfortunately those tend to be who you hear about. Of course there are still others who know nothing and just believe what CREB tells them.

CREB's useless. They're a propaganda machine.

[Winsor_Pilates]

Originally Posted by pepper24

My real estate disclosure is I see myself in my current place for 10+ years minimum and mortgage free so I have no vested interest what direction the market goes in the short to medium term. I see the facts which don't paint a pretty picture.

Why not sell now and buy back after the 20-30% bubble burst?

[AFireInside]

Originally Posted by Winsor_Pilates

Why not sell now and buy back after the 20-30% bubble burst?

Obviously thats not feasible for everyone. Also it depends when he purchased if he purchased a property in 2005 that would make absolutely zero sense. That said I don't know his situation.

[troutman]

Originally Posted by pepper24

You could lump in real estate lawyers as well.

What? How? Real estate lawyers are not paid on commission. They charge a flat fee (not based on the value of the property) per transaction. The amount of work on a file now, is the same as in the "good old days".

[Winsor_Pilates]

Originally Posted by AFireInside

Obviously thats not feasible for everyone. Also it depends when he purchased if he purchased a property in 2005 that would make absolutely zero sense. That said I don't know his situation.

Explain? When he purchased it has absolutely nothing to do with it.
The value today vs forecasted decrease is all that matters.

We don't know his situation or whether it's feasible, but that's why I asked. Seems like the obvious thing to do for someone so certain of the impending burst. A no brainer really; why wouldn't he make the certain play to make an easy $100,000+?
I know I would, wouldn't you?