Real estate in Calgary - another bubble?

[Winsor_Pilates]

Originally Posted by blankall

I don't disagree with this at all. However, I do know many people who went straight into detached without jumping up. These were all fellow lawyers, many in a two lawyer family situation.

I'm sure there are examples of this, no doubt. Maybe its a lawyer thing.
But if nothing else, it's terrible financial planning.

Say they had 150k three years ago but wanted to save another 50k per year to get to 300k down and buy detached as a first property.

In the 3 years they saved another 150k, the detached house they want went up 300-500k so they're hundreds of thousands further behind.
They would have been way better off getting something (condo or townhouse) when they had 150k down, gaining market equity, not paying rent and then upsizing once they saved more + using the gained equity.

Waiting and saving in Vancouver has proven to hurt people as you're chasing a moving target that goes up faster than people can save.
This is why it's not very common.

[MillerTime GFG]

And you're saying the influx of capital will mainly be from wealth transfers/inheritance? Yes, that's going to happen, but the main "beneficiaries" (hate using that word when it comes to inheritance) won't be in the 35-year old demographic. Most people don't have kids when they are 45-50.

[blankall]

Originally Posted by Winsor_Pilates

I'm sure there are examples of this, no doubt. Maybe its a lawyer thing.
But if nothing else, it's terrible financial planning.

Say they had 150k three years ago but wanted to save another 50k per year to get to 300k down and buy detached as a first property.

In the 3 years they saved another 150k, the detached house they want went up 300-500k so they're hundreds of thousands further behind.
They would have been way better off getting something (condo or townhouse) when they had 150k down, gaining market equity, not paying rent and then upsizing once they saved more + using the gained equity.

Waiting and saving in Vancouver has proven to hurt people as you're chasing a moving target that goes up faster than people can save.
This is why it's not very common.

I agree. The stepping stone thing is far more common in Vancouver, where even quality condos start around $750k. I was more referring to what might happen in Calgary.

[blankall]

Originally Posted by MillerTime GFG

And you're saying the influx of capital will mainly be from wealth transfers/inheritance? Yes, that's going to happen, but the main "beneficiaries" (hate using that word when it comes to inheritance) won't be in the 35-year old demographic. Most people don't have kids when they are 45-50.

In Vancouver, thus far, many people approximately 35 years old get lots of help from parents. They would have parents in the 60-75 range who all brought properties for fractions of what they are worth now. Thus creating large amounts of equity in the existing property. Most get the assistance before the parents pass, often via HELOCs on existing properties.

Once again, if things heat up in Calgary, I see that trend moving there too.


Edit: to add to this, look at how this trend has spread across the USA.

In 2015, it was noteworthy that the share of millenials getting help had increased from 13 to 17%:

https://www.prnewswire.com/news-rele...300054767.html

By 2019, that number had increased to 43%:

https://www.cnbc.com/2019/03/11/how-...r-parents.html

[Sliver]

Originally Posted by blankall

In Vancouver, thus far, many people approximately 35 years old get lots of help from parents. They would have parents in the 60-75 range who all brought properties for fractions of what they are worth now. Thus creating large amounts of equity in the existing property. Most get the assistance before the parents pass, often via HELOCs on existing properties.

Once again, if things heat up in Calgary, I see that trend moving there too.


Edit: to add to this, look at how this trend has spread across the USA.

In 2015, it was noteworthy that the share of millenials getting help had increased from 13 to 17%:

https://www.prnewswire.com/news-rele...300054767.html

By 2019, that number had increased to 43%:

https://www.cnbc.com/2019/03/11/how-...r-parents.html

I don't even consider letting my kids start from scratch to be an option as real estate is just too expensive relative to starting wages. They're in their early teens and I'm already planning how I'll help them with a down payment. Hoping right now they'll live together in a house I put the down payment on while they're in university. I'd like them to fill the extra rooms with roommates so other people can chip away at the mortgage for 4-7 years before we sell the house and they split the equity to move forward. A lot can happen between now and then, but that's my perfect-world plan.

[HockeyIlliterate]

Originally Posted by Sylvanfan

If you've been there for a long time chances are you'll fund your retirement by selling your house and moving elsewhere.

I’ve said it once, and I’ll say it again:

Houses are unique in the sense that people expect them to be available at a price that they can afford today, while also expecting that they can sell them later at a price that makes them a profit.

How to keep housing values low enough to allow people to buy one but yet high enough to allow people to use them as a retirement/savings vehicle is a bit of a conundrum.

[Fuzz]

Originally Posted by Sliver

I don't even consider letting my kids start from scratch to be an option as real estate is just too expensive relative to starting wages. They're in their early teens and I'm already planning how I'll help them with a down payment. Hoping right now they'll live together in a house I put the down payment on while they're in university. I'd like them to fill the extra rooms with roommates so other people can chip away at the mortgage for 4-7 years before we sell the house and they split the equity to move forward. A lot can happen between now and then, but that's my perfect-world plan.

That's a great plan. My dad did that for my brother first, then I took over a couple years later. He had it about 8 years and sold it for double what he paid, and the entire time my brother and I managed repairs and room mates, so he didn't have to deal with any of that. With 5 people, it's easier to cover all the costs. We had close to 40 different room mates over those years.

[pepper24]

Calgary is affordable compared to Vancouver and Toronto but I wouldn't say it's that affordable overall, just in comparison. Not a bubble but not overly affordable.

It may be because I bought my first home in the early 2000s when it was about a 1/3 of current prices. Comparing wage increases from then to now and home prices have easily outpaced that.

I'd be miserable being in my 20s again trying to save for a down payment to afford a home today at current prices. I would never ask my parents to help me out either.
I'd seriously look at renting instead as I think there are better things to do with your money.

The whole ownership mentality in Canada is a big issue.

[Leondros]

Originally Posted by pepper24

Calgary is affordable compared to Vancouver and Toronto but I wouldn't say it's that affordable overall, just in comparison. Not a bubble but not overly affordable.

It may be because I bought my first home in the early 2000s when it was about a 1/3 of current prices. Comparing wage increases from then to now and home prices have easily outpaced that.

I'd be miserable being in my 20s again trying to save for a down payment to afford a home today at current prices. I would never ask my parents to help me out either.
I'd seriously look at renting instead as I think there are better things to do with your money.

The whole ownership mentality in Canada is a big issue.

There are over 240 listings in the Calgary area for detached houses for under $400K. If that's not affordable I think you need to temper your expectations.

That's a $20K down payment and $1,300 per month in mortgage payments. Based on the affordability calculator that's roughly a household income of $50 - 60K to support that or $30K per person.

[topfiverecords]

Originally Posted by peter12

I'm not sure it will ever happen in Calgary, personally.

Not until you move back, otherwise why would anyone want to be here.

[topfiverecords]

Originally Posted by Leondros

There are over 240 listings in the Calgary area for detached houses for under $400K. If that's not affordable I think you need to temper your expectations.

That's a $20K down payment and $1,300 per month in mortgage payments. Based on the affordability calculator that's roughly a household income of $50 - 60K to support that or $30K per person.

But $400k doesn't get you into Lake Bonavista and if you can't live in Lake Bonavista then livin ain't worth livin.

[topfiverecords]

News at 11: Blankall knows people who got help from parents to buy properties.

[Sliver]

Originally Posted by topfiverecords

But $400k doesn't get you into Lake Bonavista and if you can't live in Lake Bonavista then livin ain't worth livin.

Who said you could talk about Lake Bonavista?

[blankall]

Originally Posted by pepper24

Calgary is affordable compared to Vancouver and Toronto but I wouldn't say it's that affordable overall, just in comparison. Not a bubble but not overly affordable.

It may be because I bought my first home in the early 2000s when it was about a 1/3 of current prices. Comparing wage increases from then to now and home prices have easily outpaced that.

I'd be miserable being in my 20s again trying to save for a down payment to afford a home today at current prices. I would never ask my parents to help me out either.
I'd seriously look at renting instead as I think there are better things to do with your money.

The whole ownership mentality in Canada is a big issue.

I am 40, and probably on the very edge of people with that mentality. Even then, I know many of my peers who did ask their parents. That being said I am grateful for substantial economic help I had with schooling. So although I didn't get a straight cash gift, I certainly benefit from privilege enough to get to the point where I didn't need one.

I've already stated my views on issues with the "great generational transfer". We've also seen that the average CPer is substantially better off than the average Canadian.

I honestly think what we're seeing is destruction of a fundamental part of our society, which is economic mobility. Maybe economic mobility was a bit of an illusion to begin with. The previous circumstances were clearly far from perfect. However, baby boomers gaining hundreds of thousand or millions from their property and transferring that to their spawn is going to lead to some serious problems. I agree that, going forward, housing may not be the best investment. But that does nothing to deal the massive amount inequality caused by what's already gone on, or in, in the case of Calgary, what's about to happen.

For example, we've talked about how most people don't have $160k saved up. For someone who's worked very hard to save up $50k, what happens when all of a sudden the neighbour has wealthy parents pass on and gift them $500k from a house they purchased for $50k. Buying power is instantly wiped out.

[blankall]

Originally Posted by topfiverecords

News at 11: Blankall knows people who got help from parents to buy properties.

It's not news. It's common practice. We all know people who've had help. As prices go up, that help will become more and more of a decisive factor.

[DoubleF]

Originally Posted by pepper24

Calgary is affordable compared to Vancouver and Toronto but I wouldn't say it's that affordable overall, just in comparison. Not a bubble but not overly affordable.

It may be because I bought my first home in the early 2000s when it was about a 1/3 of current prices. Comparing wage increases from then to now and home prices have easily outpaced that.

I'd be miserable being in my 20s again trying to save for a down payment to afford a home today at current prices. I would never ask my parents to help me out either.
I'd seriously look at renting instead as I think there are better things to do with your money.

The whole ownership mentality in Canada is a big issue.

Ownership isn't as big of an issue as unrealistic expectations.

I grew up in a 900 sq ft bungalow. My family was a family of 4. Nowadays, many young families are complaining a relatively new 1600 sq ft bi level is too small and cramped for a family of 3. Many think living in a 600-700 sq ft condo with a baby is impossible, even though millions, maybe even billions of people do this world wide with 3+ people.

What is considered "entry level" and "average" has significantly soared to insane heights in the last 20 years.

[topfiverecords]

Originally Posted by Sliver

Who said you could talk about Lake Bonavista?

Whoops...I forgot about the first rule about Lake Bonavista...

[GGG]

Originally Posted by pepper24

Calgary is affordable compared to Vancouver and Toronto but I wouldn't say it's that affordable overall, just in comparison. Not a bubble but not overly affordable.

It may be because I bought my first home in the early 2000s when it was about a 1/3 of current prices. Comparing wage increases from then to now and home prices have easily outpaced that.

I'd be miserable being in my 20s again trying to save for a down payment to afford a home today at current prices. I would never ask my parents to help me out either.
I'd seriously look at renting instead as I think there are better things to do with your money.

The whole ownership mentality in Canada is a big issue.

When the median family income can afford the median SFH that seems like a balanced market.

[flamesfever]

I recently felt sorry for a young man who came to fix my dishwasher. He said as much as he tried, he could not save enough to make a down payment on a house. He looked to be in his late 20s.

The only thing I could think of was to suggest that he find himself a young teacher or nurse, and then with two salaries, they may be successful. Also the pensions, that come with those two professions, would leave them in good shape when it's time to retire.

He said he would work on it.

[CliffFletcher]

Originally Posted by blankall

I've already stated my views on issues with the "great generational transfer". We've also seen that the average CPer is substantially better off than the average Canadian.

I honestly think what we're seeing is destruction of a fundamental part of our society, which is economic mobility. Maybe economic mobility was a bit of an illusion to begin with. The previous circumstances were clearly far from perfect. However, baby boomers gaining hundreds of thousand or millions from their property and transferring that to their spawn is going to lead to some serious problems. I agree that, going forward, housing may not be the best investment. But that does nothing to deal the massive amount inequality caused by what's already gone on, or in, in the case of Calgary, what's about to happen.

For example, we've talked about how most people don't have $160k saved up. For someone who's worked very hard to save up $50k, what happens when all of a sudden the neighbour has wealthy parents pass on and gift them $500k from a house they purchased for $50k. Buying power is instantly wiped out.

This is clearly a major social inequality issue, whether or not it’s recognized as such. A $150k contribution towards a house vs 0 is a huge contributor to inequality.

With automation and the gig economy eating away at the tax base, governments are going to be looking for new sources of revenue. Intergenerational wealth transfers are an obvious target. And I expect a lot of people who make all the right noises about other injustices will quietly go about doing everything in their power to evade that instrument of addressing inequality.