CIBC: Nearly 20% of homes are overvalued

[broken_legs]

No Kidding? Who would have thunk it.


http://www.theglobeandmail.com/report-on-business/economy/nearly-20-of-homes-overvalued-report/article1580185/



Seventeen per cent of Canadian homes are overvalued, CIBC warned Tuesday, with a 5 to 10 per cent price correction likely to hit in the next two years.

With higher interest rates likely to make housing less affordable in the coming years and the market beginning to show signs of cooling, prices are “probably” going to fall back as homeowners are increasingly cautious about how they spend their money.

“The most likely scenario is that higher interest rates will lead to a modest decline in prices in the coming year or two,” economist Ben Tal wrote in a report.

etc...



So the bank that lends money to you and sells that risk back to your government (you) is warning prices will go down?

[kaput]

.

[thetransporter]

i wonder how many in calgary are overpriced, 90 percent?

[Xtrema]

Not surprised. But then again, the rate increase seem to hold off indefinitely now due to the recent market crash and gloomy economic outlook.

[broken_legs]

And it starts...

http://www.theglobeandmail.com/report-on-business/realtors-to-canadians-chill-out/article1581807/



There will be no drastic drop in Canadian housing prices, the Canadian Real Estate Association said Thursday, because house prices will stabilize and climbing household income will make owning a home more affordable.

Responding to reports from some of the country’s largest banks that prices could see drops of as much as 10 per cent in the next two years as higher mortgage rates and rising prices make housing more expensive, the association said the naysayers are ignoring the cyclical nature of Canada’s real estate market.

“The relationship between average price and income has recently been cited as portending a U.S.-style correction in Canadian home prices,” said the association’s chief economist Gregory Klump. “However, such warnings ignore the longer-term relationship between prices and income, and disregard typical Canadian housing market cycle dynamics.”

etc...



.... I see. So incomes are going to rise double digits to catch up to house prices during a world wide financial crisis/depression.


:facepalm:

[Jim Rome99]

House prices in Calgary are nuts! I make $37/hour working in construction, forty hours per week, and there is no way I can afford to buy a home here. I work with a guy who just bought a condo in Woodbine for 300k. He tells me that he can't afford to miss even a single afternoon of work or he'll run the risk of not being able to eat! Why are people willing to pay so much for houses when clearly the only thing driving up the prices are low low interest rates that can only rise from here?

[Tik-Tok]

Originally posted by Jim Rome99
House prices in Calgary are nuts! I make $37/hour working in construction, forty hours per week, and there is no way I can afford to buy a home here. I work with a guy who just bought a condo in Woodbine for 300k. He tells me that he can't afford to miss even a single afternoon of work or he'll run the risk of not being able to eat!

Most people don't buy until they have double income (ie get married, or a serious relationship). Also, the average first time home buyer in Canada is 31 years old, so that give you a decade out of school to save more than the MINIMUM you need to get a mortgage.

Of course most people just piss that away instead of saving, then complain about housing prices...

[Jim Rome99]

Originally posted by Tik-Tok


Most people don't buy until they have double income (ie get married, or a serious relationship). Also, the average first time home buyer in Canada is 31 years old, so that give you a decade out of school to save more than the MINIMUM you need to get a mortgage.

Of course most people just piss that away instead of saving, then complain about housing prices...

I'm 26, very responsible with money and I have managed to save 50k so far. I just don't understand why people are so willing to spend crazy money for a house that is simply not worth what they are paying. It is extremely out of hand, many people I talk to have zero down, sub-4% mortgages on the go. Am I the only one who sees a problem with this down the road?

[Tik-Tok]

Originally posted by Jim Rome99


I'm 26, very responsible with money and I have managed to save 50k so far. I just don't understand why people are so willing to spend crazy money for a house that is simply not worth what they are paying. It is extremely out of hand, many people I talk to have zero down, sub-4% mortgages on the go. Am I the only one who sees a problem with this down the road?

Good on you, it seems like your coworker didn't though. If you bought a $300g condo with $50g down, your mortgage would only be around $1500/month, which is perfectly reasonable with a $37/hour job.

When the boom happened and prices doubled, pretty much EVERYONE in Calgary said our city was due for an increase, but it was high. Now the prices have come down 20-25%, so we may be a little high still, but about right of a growing metropolitan area. IMO anyways.

[7thgenvic]

I'm moving south..

[Jim Rome99]

Originally posted by Tik-Tok


Good on you, it seems like your coworker didn't though. If you bought a $300g condo with $50g down, your mortgage would only be around $1500/month, which is perfectly reasonable with a $37/hour job.

When the boom happened and prices doubled, pretty much EVERYONE in Calgary said our city was due for an increase, but it was high. Now the prices have come down 20-25%, so we may be a little high still, but about right of a growing metropolitan area. IMO anyways.

Taking out a 250k mortgage at 4% interest would work out to paying $833.33/month in interest alone. Not worth it man! If I only paid 1500 a month total I would only be knocking $666.67/month off the principle, meaning that after one year of paying that amount, I'd still owe the bank $242k. That's paying eighteen thousand dollars and only getting credit for eight grand.

[kaput]

.

[Jim Rome99]

Originally posted by kaput
:werd: That doesn't take into account property taxes, utilities, etc. My rent is only $700 for an inner city condo, including everything. Sure I have a roommate, but I've known the guy for 10 years so it's actually pretty good. Using Jim Rome99's numbers, I'm 'wasting' about $500/month less than I would be if I owned. If you consider that $500/month in savings the same way as you would equity, I'm 'paying off my mortgage' at almost the same rate. Even if prices rise, I'm coming out far ahead in the short to medium term. But there are fewer and fewer people every week who think prices will continue to go up forever.

Bang on kaput. I'm hoping I can continue to save 10-15k a year, then when interest rates rise to the 6-8% range, as they eventually will, even if it takes ten years, I'll have cash on hand to buy a place for 200k that is selling for 400k now.

[CHICHARITZHI]

Originally posted by Jim Rome99
House prices in Calgary are nuts! I make $37/hour working in construction, forty hours per week, and there is no way I can afford to buy a home here. I work with a guy who just bought a condo in Woodbine for 300k. He tells me that he can't afford to miss even a single afternoon of work or he'll run the risk of not being able to eat! Why are people willing to pay so much for houses when clearly the only thing driving up the prices are low low interest rates that can only rise from here?


You're making $4000 net a month or more , so why u can't afford to buy a house? where's your money goes?
:D

[broken_legs]

Originally posted by CHICHARITZHI



You're making $4000 net a month or more , so why u can't afford to buy a house? where's your money goes?
:D

Say Jim Rome goes to buy a modest starter detached home on the outskirts of Calgary in a new community.

It sells for 350, he puts 10% down, and is left with a 315k mortgage.

At 25 yr amortization, 4.7% thats 1780/month.

Thats already 44% of his disposable income.
Now add in property taxes - 150/month
Utilities - 150 month

And he's spending well over 50% of his disposable income.

Now factor in that he's living on the outskirts of calgary and has to drive an extra 20-30 minutes to get to work now... Thats an extra 150/month on gas.

Now factor in that he wont have time to cooka decent meal for himself because he spends all day driving to and from work and has a really shitty quality of life. He has to eat out a lot... That means he spends an extra 400/month on food.

Now Jim is getting fat from all the mcdonalds, and his work starts to suffer so his boss doesnt give him the lucrative overtime hours he needs. Now hes only making 3000/month.

Oops,, hes already spending more than 3000. Hello bankruptcy, alcoholism, and wife beating.

Is that what you want for Jim?

[scat330]

^lmfao

[DJ_NAV]

hahahahaha... funny but it happens!!

[broken_legs]

[b]Foreclosure wave deemed unlikely[b]

DBRS expects house prices to fall in Canada but says mortgage market is more stable than it was in U.S.



[quote]Canadians will be spared a U.S.-style wave of foreclosures when the housing market corrects and interest rates rise, according to a report from DBRS Ltd. examining Canada’s $1-trillion mortgage market.

DBRS expects housing prices to fall and acknowledges that the soaring trajectory of consumer debt is worrying. But the debt-rating firm’s study nonetheless paints a picture of a home lending business that is on much more stable footing than the one in the U.S. before its bust.

For that reason, any housing correction in Canada is likely to have a muted effect on the financial sector, nothing like the systemic problem that the U.S. downturn created by crippling banks and mortgage insurers.

“You’re not likely to have factors supporting further [home] price increases; you could have factors leading to price corrections, but they shouldn’t be anywhere near the scale we’ve seen in the U.S.,” said study author Jerry Marriott, who specializes in rating mortgage-backed bonds for DBRS.

“There are just some fundamental characteristics of the Canadian market that make lending in Canada less risky than in the U.S. – a combination of the fact that the banks have continued to use prudent underwriting and maintained better capital ratios.”



Coles:
- Houses are overvalued
- They don't think its going to affect the banks
- The banks are "prudent" in Canada

My Notes:
- Houses are overvalued
- It's going to affect Canadian banks
- Canadian banks have 20:1 capital ratios. If houses and stocks and bonds all go down 5%, banks will be insolvent.
Why do you think they made emergency loans available to Canadian banks when the stock market crashed in '08??

[911fever]

so if I spend $200,000 on a house and put 20k down @ a variable 3.7% what would that be, $1000 a month? That's not unreasonable, plus $150 for utilities. And if I rent it out for $500-$600 a month that's reasonable!

[barmanjay]

Broken Legs - what do you do for a living? You are so infested and infatuated with a housing market crash/fall

Are you the future social worker for Jim Romes kids? or his future Re-man Corrections officer?

[broken_legs]

Originally posted by barmanjay
Broken Legs - what do you do for a living? You are so infested and infatuated with a housing market crash/fall

Are you the future social worker for Jim Romes kids? or his future Re-man Corrections officer?

:zzz:

Heres some more for you:

CREA on May 26
http://www.theglobeandmail.com/report-on-business/realtors-to-canadians-chill-out/article1581807/



Realtors to Canadians: Chill out
Association that represents the country’s agents disputes reports suggesting house prices set for big drop


CREA on June 2
http://www.theglobeandmail.com/report-on-business/house-prices-to-fall-next-year/article1589243/



House prices to fall next year
‘Demand-driven’ downturn to pull prices lower, updated CREA forecast says


CREAs economist thinks that the recent sales have been sales pulled from the future due to low rates today... GEE, ya think he might be right? lol

Just like there was never a "crash" in calgary... We just saw prices drop 15% in a year. But thats not a 'big drop', and certainly not a crash. So anyone who thinks housing is overvalued is obviously a heretic.
:rolleyes:

I'm sure that when the average price of a house in New Brunswick is $350,000, all of those people that make 30,000/year are going to start buying real estate like crazy. That will pull us through, so Im not worried.

[Sugarphreak]

...

[masoncgy]

Originally posted by broken_legs
We just saw prices drop 15% in a year. But thats not a 'big drop', and certainly not a crash.

Considering the run up in prices in 2006-2007 was well above 15%... we experienced a correction more than a crash when the shit hit the fan.

Come on... I was working for a major builder and we were selling single family detached lane product (ie: basic starter/no garage) in Silverado for almost $400,000... that wasn't going to remain sustainable.

Now that same home sells in the $350K range... big deal... that's still far above the $200-$225K it would have sold for in 2004-2005.

[rc2002]

I'm expecting a correction in prices (maybe 5-10%), but definitely not the crash everyone is looking for. There's too much at stake and the government just won't let it happen.

Besides Calgary has the highest average income in the country and low unemployment. The ratio of average income to average house price is low in Calgary. If there's any place in Canada that will resist downward pressure on price, it's Calgary.

I've noticed a lot of Ontario and BC license plates in the last couple years. I bet housing seems very affordable for anyone moving from Toronto and Vancouver, especially at the wages that are being paid in Calgary. There doesn't seem to be a shortage of demand, and all the people sitting on the sidelines saving cash are just adding to that demand.

It's a different environment now. House prices in 2003 were half of what they are now. But wages were also half of what they are now.

[Tik-Tok]

Originally posted by richardchan2002
But wages were also half of what they are now.

:rofl: Tell that to my boss :(

[bspot]

Originally posted by Sugarphreak
If anything housing is undervalued right now

Larf. Look at the real estate fundamentals.

Look at the price to rent ratios.

They are all HORRIBLE and suggest a very inflated real estate market.

I don't think we see significant growth for a long time. As for correction, it'll likely happen, but I doubt it's going to turn the country upside down.

I own a house and a rental place, if anything I want to believe these rosey outlooks, but I know there is no way things are heading up anytime soon.

[msommers]

I really have no idea what all this means...but are people saying it's better to rent right now than own?

[cmyden]

Originally posted by msommers
I really have no idea what all this means...but are people saying it's better to rent right now than own?

There are so many factors that come into play when asking a question like that, not the least of which is trying to make predictions on...

- what you believe the appreciation (or depreciation) of real estate will be going forward

- the future of interest rates

- the 'opportunity cost' of what your money would be (how much you would make if you took the money that would otherwise be going into your house and investing it).

And then of course, what value do you place on being able to call a home your own? Is it priceless? Probably is for some.

But, to get an idea of what the numbers are, the best thing you can do is play around with a good 'rent vs buy' calculator. Here is one of the better ones that I've seen, credit goes to Kevin over at EdmontonHousingBust.com

Go here:

http://spreadsheets.google.com/ccc?key=0AkieEQTir1MUdGVzcUk1U0loeEJENVUzdVJUSjdIaEE

Click File -> Download as Excel -> Open it up and put in some numbers. (Everything from Calculations on down is automatically calculated)

[Cos]

A few weeks ago I saw a study that compared average house prices across the country. We were the same price as Saskatoon or something. Vancouver and Toronto were almost 2-3x what a house costs in Calgary. There is no way someone working the same job as me in Ontario is making 160,000 to 240,000 a year.

If anything I would be worried owning property in BC/Ontario right now.

[Chandler_Racing]

Just a question, but do you own a house/condo?


Originally posted by broken_legs
CREAs economist thinks that the recent sales have been sales pulled from the future due to low rates today... GEE, ya think he might be right? lol

Just like there was never a "crash" in calgary... We just saw prices drop 15% in a year. But thats not a 'big drop', and certainly not a crash. So anyone who thinks housing is overvalued is obviously a heretic.
:rolleyes:

I'm sure that when the average price of a house in New Brunswick is $350,000, all of those people that make 30,000/year are going to start buying real estate like crazy. That will pull us through, so Im not worried. [/B]

[Tik-Tok]

Originally posted by Cos
A few weeks ago I saw a study that compared average house prices across the country. We were the same price as Saskatoon or something. Vancouver and Toronto were almost 2-3x what a house costs in Calgary. There is no way someone working the same job as me in Ontario is making 160,000 to 240,000 a year.

If anything I would be worried owning property in BC/Ontario right now.


2-3x per square foot, but average home price isn't that far off. Typical homes and property size in Van at quiet a bit smaller than us.

[Cos]

Originally posted by Tik-Tok



2-3x per square foot, but average home price isn't that far off. Typical homes and property size in Van at quiet a bit smaller than us.

ah that could have been it. But I remember something saying that Vancouver and Toronto average house and lot was almost 900,000? Maybe that wasnt for GTA/GVRD, maybe that was for Toronto and Vancouver PROPER.

Or maybe I am pulling this article out of my ass but I remember reading it in the globe when I was on the road in April/May.

[Tik-Tok]

Originally posted by Cos




Or maybe I am pulling this article out of my ass but I remember reading it in the globe when I was on the road in April/May.

I just did a search, and a few articles came up, they were all sensationalizing a bit. An average Two-Story house in Vancouver (proper) is over $900g.

Average Metro Vancouver home (NOT including Surrey and Langley) is $663,000 as of last month. So throw Surrey and Langley in the mix, and you're probably looking at an average of $500g.

[Feruk]

Interesting Calgary real estate statistics. Let's look at the most recent data; May 2010.



Buoyed by a surge of sales in the luxury end of the market, average prices reached their second highest level ever recorded for the month of May with $483,240. Median prices remained fairly stable with $420,000. The only year with higher May prices was back in 2007 when the average was $487,523 and a median of $435,000.

Sales weren’t as strong. With 1262 transactions, it was the lowest May sales level since 2000.

With the drop in sales and increased inventory, the Absorption Rate reached 4.47 Months, climbing further out of a balanced market.


Have a look at the charts. Average sales price at almost all time high (only time it was higher was right before the drop). Now this wouldn't be bad, except the NUMBER of transactions hasn't been this low since 2000.

Less people buying, prices getting outrageous, absorbtion rate rising out of balance again.

HOW can prices possibly go up? Anyone who thinks this "correction" is over is lying is IGNORING supply-demand economics.

http://calgaryrealestatereview.com/2010/06/01/may-2010-calgary-real-estate-statistics/ (http://)

[Cos]

Originally posted by Tik-Tok


I just did a search, and a few articles came up, they were all sensationalizing a bit. An average Two-Story house in Vancouver (proper) is over $900g.

Average Metro Vancouver home (NOT including Surrey and Langley) is $663,000 as of last month. So throw Surrey and Langley in the mix, and you're probably looking at an average of $500g.

That sounds about what I remember reading. I think from what I remember GVRD (including Chilliwack, because they expect people to commute a bit :banghead: ) was just over 450,000. If you think of the houses in Kensington, Grey pointe, etc. I would be hard pressed to buy a nice house there with 7 digits in it. It does skew the numbers a bit.

Still, my office was on Dunsmuir in downtown Van and Burnaby was far from cheap to find a place, let alone buy a place. I couldnt afford it, but I can afford Calgary. Go figure

[ryansteg]

there are many ways a person can sell a house. using a realtor is one the other is gaining equiteble finances. use your brain and stick to your gut; thats what i always say.

[broken_legs]

Originally posted by Chandler_Racing
Just a question, but do you own a house/condo?




Yes I do. As I've stated 100,000 times in every other thread where I get called out for 'missing the boat'. All you other home owners and realtors living in la la land can't stand to hear anything contrary that might affect the continuation of your personal wealth. In your eyes only people that don't own a house could possibly think real estate is a bad investment :rolleyes:

I bought a house in 2006 and it promptly increased in value by 44% over the next 1.5 years. Since then it has come down 28% - Or at least thats what the last CMA told me. I have a fixed rate 25/yr @ 4.6% until 2015.

You might also be interested to know that:
My cock is 13.5" (wide)
I can bench press 500 lbs
and I make 6,000,000 a year trading stocks

Anything else you want to know?

[Abeo]

Originally posted by Cos
A few weeks ago I saw a study that compared average house prices across the country. We were the same price as Saskatoon or something. Vancouver and Toronto were almost 2-3x what a house costs in Calgary. There is no way someone working the same job as me in Ontario is making 160,000 to 240,000 a year.

If anything I would be worried owning property in BC/Ontario right now.

Toronto isn't Ontario and Vancouver isn't BC. Owning a house in Timmins or Windsor isn't the same as owning a house in Toronto. Also, Calgary is a third to a fifth the size of VAN and TO... apples to oranges.

I have a friend in Ont who I graduated with (engineering) who is making more than me, in a town where a $250k house gets you a half acre, 1200 sq ft house, and a 20x30 garage. Coming from that to here where you can buy a 1910 house on a sliver of land for 400k... that makes no sense to me.

[broken_legs]

Originally posted by Feruk
Interesting Calgary real estate statistics. Let's look at the most recent data; May 2010.



Have a look at the charts. Average sales price at almost all time high (only time it was higher was right before the drop). Now this wouldn't be bad, except the NUMBER of transactions hasn't been this low since 2000.

Less people buying, prices getting outrageous, absorbtion rate rising out of balance again.

HOW can prices possibly go up? Anyone who thinks this "correction" is over is lying is IGNORING supply-demand economics.

http://calgaryrealestatereview.com/2010/06/01/may-2010-calgary-real-estate-statistics/ (http://)


^^^ you're obviously an extremist nut job who thinks houses are going to be at 1$ tomorrow.

I can tell because you've supported your rational argument with real facts and numbers. I instantly knew you were not one us elitest house wealthy calgarians.

[n1zm0]

Originally posted by msommers
I really have no idea what all this means...but are people saying it's better to rent right now than own?

i'm mid 20s and i bought a townhouse in the SW for starters (but moreso plans to flip it), i couldn't bear to think about paying off someone elses mortgage just for a place to stay as my mother owns 3 condos, 2 of which she owned then i was still living at home and i used to see these cheques come in every month from the renters while she'd sit and relax while they paid themselves off.

there are houses out there (i mean if you really wanted a full sized house for 250-300 it'd have to be the NE lol, sorry), you just have to be very 'frugal' in house hunting i guess for the surrounding communit(y/ies)/access to schools + busses etc for resale if youre going the flipping route. you also come to understand there are sacrifices you have to make to have what you want (i.e OK backyard + garage in a townhouse in the SW/NW and lower SE = good fken luck at a decent $), which basically means in the end you have to start saving obviously, cause we all have to start from somewhere right.

imo if you have the chance to buy a place for yourself, do it, because you can literally just punch in your monthly payments x12 for where you rent, look at that number and :cry: :cry: :cry: , cause all that $ is paying off someone elses mortgage, whereas you could be paying that much and a bit more towards your own mortgage..

[Cos]

.

[cmyden]

Originally posted by n1zm0

imo if you have the chance to buy a place for yourself, do it, because you can literally just punch in your monthly payments x12 for where you rent, look at that number and :cry: :cry: :cry: , cause all that $ is paying off someone elses mortgage, whereas you could be paying that much and a bit more towards your own mortgage..


Statements like this make me think finance courses should be compulsory in the education system.

[msommers]

Thanks for the spreadsheet link, Chris. I'll have to play with it tonight.


Originally posted by n1zm0


i'm mid 20s and i bought a townhouse in the SW for starters (but moreso plans to flip it), i couldn't bear to think about paying off someone elses mortgage just for a place to stay as my mother owns 3 condos, 2 of which she owned then i was still living at home and i used to see these cheques come in every month from the renters while she'd sit and relax while they paid themselves off.

there are houses out there (i mean if you really wanted a full sized house for 250-300 it'd have to be the NE lol, sorry), you just have to be very 'frugal' in house hunting i guess for the surrounding communit(y/ies)/access to schools + busses etc for resale if youre going the flipping route. you also come to understand there are sacrifices you have to make to have what you want (i.e OK backyard + garage in a townhouse in the SW/NW and lower SE = good fken luck at a decent $), which basically means in the end you have to start saving obviously, cause we all have to start from somewhere right.

imo if you have the chance to buy a place for yourself, do it, because you can literally just punch in your monthly payments x12 for where you rent, look at that number and :cry: :cry: :cry: , cause all that $ is paying off someone elses mortgage, whereas you could be paying that much and a bit more towards your own mortgage..

This echoes what is in my mind actually. Depending on how much one can get approved for, you're either stuck renting (to me equals throwing your money away) or getting a condo. I wouldn't be against condos so much, but the fees are variable and would be a great addition to a mortgage payment (ie: ~400/month). This is why, to me, it doesn't make sense to get a condo. It's like paying a mortgage and rent. I agree, finding a decent place for 250,000 is hard pressed to find even in the NE.

Then again, looking to buy a place right out of school does seem foolish in some aspect. On the other hand, if you're paying 800/month + utilities for a place, you might as well start looking to buy, I think.

[Cos]

Originally posted by msommers
I wouldn't be against condos so much, but the fees are variable and would be a great addition to a mortgage payment (ie: ~400/month). This is why, to me, it doesn't make sense to get a condo.

This is the #1 reason I purchased a townhouse as my first place. We paid about 15k more for the townhouse over the condo but our condo fees just jumped 4% :eek: to $149.00 The Apartment Condo's that are in the same complex as us pay between $300-$500 a month. They get LESS than I do (I have grass that needs to be cut and watered). If the difference was 60k then I can see why people buy Apartment Condo's but when it is only 15 I dont get it.

[n1zm0]

Originally posted by msommers
I agree, finding a decent place for 250,000 is hard pressed to find even in the NE.

not impossible for a townhouse in the SW/NW, just difficult to find, if it has a backyard and a garage + 2 or 3 floors @ 250k it will most likely need some work if youre not afraid of that and it will probably be older, its all about your preference really: like do you care about having a backyard with privacy for BBQs with friends or just chill inside on a balcony?, do you care about leaving your car outside all the time and moreso to that do you do your own basic vehicle maintenance which a garage of your own would be really nice to work in, or do you have more than one vehicle?

the one i found had both a larger back yard and a heated single car garage + parking pad right out the door, but the interior needed to be redone (the sacrifice part) which i had already decided that i wasnt afraid to somewhat invest in and do myself gradually so a few years down the road (basically IKEAize/laminate click floor the hell outta it lol), great quiet area with quick access to major highways, a single family could move in to a pretty modern looking place and even send their kids to the school down the street walking distance, bus stop right out the front door etc. lots of things that appeal to other first time buyers/former renters when they want a place of their own cheaper than a house.

[kaput]

.

[broken_legs]

One thing I never hear people mention is that when you buy a house you're taking on a huge amount of RISK.

Yes most people buy houses for the long term.
Yes over there are long stretches where if you hold real estate and sell it you are even or a winner.


But no one really talks about the RISK of being attached to a ridiculous amount of debt tied to an asset that can go down in value.

Renting, the only risk you take is liability for damaging the place (if you dont have tenants insurance) and the monthly cost of your rent.

Buying, you're taking the risk that if you need to move in a few years that you will sell at a loss... Either you will have to change your life plans for the house and not move, buy a new house and rent the old one (possibly at a loss), or sell it at a loss and be stuck with what could potentially be a huge bill.

But on beyond Calgary house prices only go one way. So you've probably got nothing to worry about.

[Tik-Tok]

Originally posted by broken_legs


But no one really talks about the RISK of being attached to a ridiculous amount of debt tied to an asset that can go down in value.

But on beyond Calgary house prices only go one way. So you've probably got nothing to worry about.

Historically speaking, real estate only goes up. It may drop from time to time, but even those people who bought at peak will see gains in the long term.

It would take a serious situation in a neighborhood for property to stay down for good. If people actually bought to live in, instead of everyone and their dog trying to flip houses, then you'd see better pricing... but that will never happen in a city.

[broken_legs]

Originally posted by Tik-Tok


Historically speaking, real estate only goes up. It may drop from time to time, but even those people who bought at peak will see gains in the long term.

It would take a serious situation in a neighborhood for property to stay down for good. If people actually bought to live in, instead of everyone and their dog trying to flip houses, then you'd real better pricing... but that will never happen in a city.

Historically yes. I put that disclaimer int he top of my post.

You seem to be ignoring the 5-10 year periods when it dropped. During that time you are fucked.

But if you are comfortable taking on that risk, good for you. Just don't pretend like it isnt there.

[rc2002]

Originally posted by broken_legs


Historically yes. I put that disclaimer int he top of my post.

You seem to be ignoring the 5-10 year periods when it dropped. During that time you are fucked.

But if you are comfortable taking on that risk, good for you. Just don't pretend like it isnt there.

I wouldn't say you're fucked. Even if you're underwater on your mortgage, so what? You'll just take a bit longer to pay off your house.

At the end of the day all you need is a place to live. You can either pay rent or pay a mortgage. Some people choose to rent and some decide to buy. The ones who have decided to buy are obviously comfortable taking the risk.

[smc]

Originally posted by broken_legs


Historically yes. I put that disclaimer int he top of my post.

You seem to be ignoring the 5-10 year periods when it dropped. During that time you are fucked.

But if you are comfortable taking on that risk, good for you. Just don't pretend like it isnt there.

It isn't enough for the house price to go up, it needs to go up faster than inflation + property taxes and payback any maintenance costs.

Is it possible to get a mortgage options (mortgage insurance) in Canada? Some city in the states have mortgage option exchanges. With these exchanges you can buy an option to sell your house at a certain date in the future for a predetermined amount and when the date arrives you can decide to execute the option or not depending on the house price. I hate having a ton of money tight up in a house in a city with such a poorly diversified economy.

[broken_legs]

Originally posted by richardchan2002


I wouldn't say you're fucked. Even if you're underwater on your mortgage, so what? You'll just take a bit longer to pay off your house.

At the end of the day all you need is a place to live. You can either pay rent or pay a mortgage. Some people choose to rent and some decide to buy. The ones who have decided to buy are obviously comfortable taking the risk.

all you "you need a place to live" people seem to conveniently ignore reality.


Bottom line, you need to move? you are fucked unless you can take a huge loss and sell, take a monthly rental loss or change your life to live around your house.

Change of job? Family problems? Great opportunity? Love of your life? Need money for XYZ? Have kids, need to upgrade?

Yeah there's absolutely no reason why you'd ever want to move in less time than it takes for real estate to recover
:rolleyes:

[Cos]

^^ haha that is funny actually. I find it more stressful owning my own place because of this exact reason. My rent was pretty close to my mortgage payments but I didnt care if people cat sit at my apartment, but I am nervous at the house. That noise in the floorboards, never cared before. Now in my house I am trying to figure out if my roof is going to collapse.

that being said i wouldnt do it differently

[Sugarphreak]

...

[autosm]

First time buyers buying homes based on others gaining equity is a very bad reason to jump into the market.

On a side note

Is no one worried about all the baby boomers selling property in the years to come?

[TomcoPDR]

Originally posted by broken_legs



You might also be interested to know that:
My cock is 13.5" (wide)


Anything else you want to know?

Is that erected or flaccid? Diameter or pure side to side measurement?

[broken_legs]

Originally posted by TomcoPDR


Is that erected or flaccid? Diameter or pure side to side measurement?

E Peen is hard to measure. ;)

Time for some more mental masturbation:love:

[broken_legs]

Originally posted by Sugarphreak

All of these things you are worrying about usually only occur as a result of bad planning, essentially this is just fear mongering.


So let me get this straight:
You're telling me that asking people to think twice about buying a house at a the market peak, and interest rate bottom, during a world wide recession/debt crisis is fear mongering?

How exactly are you going to plan for anything I mentioned above when the value of your house is 30-40-50-60-100k less than what it was when you bought it? Should your proper planning include a 100k reserve fund??? :confused:

I like to think of it more like FACT mongering. But hey, math be crazy.


Oh god... And this:



Originally posted by Sugarphreak

An investment means you invest money over a period of time to earn a return...


You're confusing "investing" with buying a house. You must have been talking to the resident Beyond Realtor crew....


Originally posted by JordanLotoski
As a buyers agent its not about selling just a house to my clients its about selling an investment. I want that inventment not only to be suitable for my buyer to live in for the next 3-5 years but to be great investment for the future. I have talked my clients out of lots of homes based on location or floorplan. Over the years I have made my clients alot of money based on getting them into the "right" home.

So I think when you say why do we need realtors...I guess "you" dont, perhaps your grouped in the 2% of people that are confident to take the largest investment of their lives and sell it. the other 98% of the population would rather leave it in the hands of a professional who lives , breaths, sleeps real estate as i do.

[Sugarphreak]

...

[rc2002]

Originally posted by broken_legs

Bottom line, you need to move? you are fucked unless you can take a huge loss and sell, take a monthly rental loss or change your life to live around your house.

Change of job? Family problems? Great opportunity? Love of your life? Need money for XYZ? Have kids, need to upgrade?

Yeah there's absolutely no reason why you'd ever want to move in less time than it takes for real estate to recover
:rolleyes:

Facetious much? You keep using words like fucked and huge loss. Then you use numbers like $100k; which in the big scheme of things is not a lot of money.

I made an informed decision to buy. My work is stable such that I'm going to be in Calgary for a long time and my mortgage will be paid off long before I will ever need to move or upgrade. Besides, everyone I know who has been relocated by their company has been guaranteed their original purchase price on their home even if it sells for less than they bought it for.

As for love of life, a homeowner is no different from a renter except that a renter is paying money to his landlord, and an owner is paying money to the bank. They both have similar disposable income except the buyer will eventually own his home.

[spikerS]

Your house should never be considered an investment. It is your house.

If you buy a second house to rent out, THEN it is an investment.

It is the people who buy their house, viewing it as an investment, and leverage it to the breaking point. You would not believe the number of home owners that I know that are screwed, and they admit it. Their houses are not worth what they paid for them, and most of them are below what is currently owed on them.

A few of them even are desperately trying to move, but no one will come close to touching their break even point.

[broken_legs]

Originally posted by richardchan2002


Facetious much? You keep using words like fucked and huge loss. Then you use numbers like $100k; which in the big scheme of things is not a lot of money.

I made an informed decision to buy. My work is stable such that I'm going to be in Calgary for a long time and my mortgage will be paid off long before I will ever need to move or upgrade. Besides, everyone I know who has been relocated by their company has been guaranteed their original purchase price on their home even if it sells for less than they bought it for.

As for love of life, a homeowner is no different from a renter except that a renter is paying money to his landlord, and an owner is paying money to the bank. They both have similar disposable income except the buyer will eventually own his home.


Jesus@!

What the hell is wrong with you people? This is like attack of the home owning body snatchers!!

I had no idea I was the only person who thought 10's of thousands of dollars loss when I had to sell my house was a big deal. According to you, 100k isn't even a big deal??? Am I the only person in Calgary that doesn't agree with this???

So lets review:
- If real estate goes down Proper planning will save you from losing money. (Proper planning = having no plans, and staying in your house no matter what, no matter how long it takes to recover the house value) OK gotcha

- If real estate goes down and you are forced to move, 100k loss?? Thats minor. Everyone has 100k sitting around. Don't even worry about it.


None of you people can even address the issue. You can't admit that there is even a CHANCE you might have some unforeseeable circumstance that would make you need to move.

A homeowner is no different than a renter??? Really???

Because a renter can pack up and leave on a moments notice with a penalty of a months rent. Can a homeowner do that when the value of their house has gone down?




I'm at a loss. I can't argue sense against your emotions.

[Sugarphreak]

...

[broken_legs]

^^ How long have you been a Body Snatcher.

[masoncgy]

On a side note to this thread, my neighbors house across the street just went up for at least 20% more than it's worth... no wonder the market is starting to slow... the asking prices for some of these homes is just insane.

At the same time, I am hoping that my aggressively priced property will sell even quicker, looking like an absolute steal compared to some of these heavily overpriced shacks!

[Pacman]

Originally posted by broken_legs



Because a renter can pack up and leave on a moments notice with a penalty of a months rent. Can a homeowner do that when the value of their house has gone down?



The renter will still have to find another place to live, and pay rent. The homeowner will continue making the mortgage payments to the bank.

What's the difference?

[BigMass]

renting you can move whenever, buying you can't. During the crash of the early 90s, in Calgary, you couldn't even give you house back to the bank. My dad tried this and the bank wouldn't even take his house back. They let him live in it for free until he was able to find another job. Renting wins in the mobility department. Renting is stress free. You have nothing to worry about in terms of maintenance, house prices, market volatility, taxes, interest rates etc. Buying feels amazing when interest rates are at almost zero percent and most of your payments are going into your principal. If interest rates even hit a meager %5 those that are maxed on their variables right now are fucked. A small %3 rate hike can mean an extra %30-%40 more on monthly payments for some. Young people in Calgary have no idea what a real recessions feels like. We were about to hit hard times until the government decided to stimulate social programs and subsidize house prices. Overpriced houses are a huge factor in western economies so the government did everything it could to prop them up. This at the expense of killing our dollar, evidenced by the fact that Gold is at almost $1400 CAD, from about $300 just 10 years ago.

There are pros and cons to both and rarely one wins economically over the other. It's a lifestyle choice. If you leave it to the free market, rarely can renting and buying be that far apart because one is a factor of the other. Obviously we all know we don't live under a true free market system so their are other variables like "government". But still, the factors are small enough that people should choice buying vs renting based on their lifestyle needs, not economic needs. Economic factors comes into play when you're buying to rent as a business. When you're living in your house, it's not an investment. People are conned into believing that and that is a mistake.

[Xtrema]

Originally posted by Sugarphreak
^^ I don't understand why you are having such a hard time with this, if you lose 100K on your house during a recession you only lose it if you sell.... otherwise it is just a paper loss.

That's right. Given that you still have income to support your house. You can wait for the market to come back.

What broken leg try to say is that there is unforeseeable circumstances that will force you to sell. Divorce, job relocation etc. Unless you see yourself in the same city for over 5 years, buying a house can be a liability.


Originally posted by Pacman


The renter will still have to find another place to live, and pay rent. The homeowner will continue making the mortgage payments to the bank.

What's the difference?

Downsizing.

You lose an average of $10K to Realtor when you change house. You lose way less with rent depending on the lease agreement.

And that's if you don't have your equity wiped out by lower market price.


Originally posted by spikers
Your house should never be considered an investment. It is your house.

If you buy a second house to rent out, THEN it is an investment.

It is the people who buy their house, viewing it as an investment, and leverage it to the breaking point. You would not believe the number of home owners that I know that are screwed, and they admit it. Their houses are not worth what they paid for them, and most of them are below what is currently owed on them.

A few of them even are desperately trying to move, but no one will come close to touching their break even point.

You just described everyone who bought in 2007.

[Abeo]

So I guess the consensus is that house prices go up (never down), that house prices are unaffected by interest rate or number of listings, Calgary house prices are fairly valued, and that the local economy is unshakable. Alrighty then, I better call my broker. Heck, its only a quarter of a million I'm playing with, thats peanuts.



:rolleyes:

[lint]

Originally posted by Abeo
So I guess the consensus is that house prices go up (never down), that house prices are unaffected by interest rate or number of listings, Calgary house prices are fairly valued, and that the local economy is unshakable. Alrighty then, I better call my broker. Heck, its only a quarter of a million I'm playing with, thats peanuts.

:rolleyes:

Only a quarter million? that's a shack in forest lawn

[Abeo]

Originally posted by lint


Only a quarter million? that's a shack in forest lawn

Well, like all ballers on beyond, I have a hefty downpayment. That can get me a nice unrenovated 800 sq ft 60's house in fairview, or a shoebox south of 22x.

[Sugarphreak]

...

[rc2002]

broken_legs, the crash you are waiting for is not going to materialize. You should know by now that any market is just a giant ponzi scheme at heart. That's why asset prices have continually inflated historically, and that's why they'll continue to inflate.

Look at what happened in this global financial crisis. Globalization has made it so that everyone is a stakeholder. Now it's in everyone's best interest to keep the ponzi scheme rolling. Even net owners of debt (like China) will keep it rolling.

The government is spending your tax dollars to fuel the ponzi scheme - you might as well go along for the ride. The low interest rates, bailouts, money printing, and stimulus spending is going to result in inflation (which will include assets like houses). The ultimate direction is up, even if there are some dips along the way.

Talk is talk. Let's revist this thread in the future and see what actually happens.

[Xtrema]

Originally posted by Sugarphreak
Just for arguements sake here is a typical definition for what an investment is:
I don't know anybody who does not hope thier house will apprecaite in value over time... so by definition it is an investment.




While I can agree with your points, if you don't have income and you are renting you are pretty much in the same boat.

As far as unforseen events go; If you are getting divorced and you are down 100K on the house, maybe you and the X don't sell it right away. Same goes for job relocation... is a job somewhere else worth a 100K loss? People always have choices, if you do happen to take a loss on your house you can at least mitigate how much by waiting it out.

So really I would call it more of a commitment than a liability. As with any such commitment, you put a certain amount of priority on keeping it or you face the consequences. Having a house or condo is a rewarding experience and typically in addition to providing you a place to live it also apprecaites in value over a period of time.

Broken Legs is just afraid of any kind of commitment; you could apply his arguments to anything that needs a commitment; school, kids, marriage, ect.

House isn't a investment unless you are moving to a market that cost less.

For example, you sell a NY apartment and move to Calgary or sell a 2000 sqft in Calgary and move to Phoenix. You may gain on book value and possible available credit, you don't really "profit".

I'll use one of my relative who bought in 2007 as an example. His home is now 3 years old. He paid $560K. A similar home, new with more upgrades in the same area can be had for $480K. His mortgage payment is $3000/month.

If he lose his job today and force to sell, he will lose around ~$100K ($15K for agents, mortgage penalty and $80K in value), which is basically his down payment.

If he rents, he will get the same house for around $2000/mth which is similar to the interest portion of the mortgage without having $100K at risk.

Now your mileage may vary and nobody can predict what will happen. Most people bought in 2007 was spooked by the rise of the bubble. But if you look around you right now, all the stats, desperation of developers, raising interest, bad economy, people losing jobs, the recovering market is just sales pulled forward. You know the market will be cool for the next little while. So if you can hold on buying, hold.

I'm not predicting the disaster scenario Broken Leg is seeing. But if you only have 5 to 10% down, and not established in your career/job/business, hold on a bit. It's the first time home buyer that are really open to the risk. But keep shopping for bargains that may worth the risk.

Sure, as a home owner, I would love nothing better than keep the ponzi scheme going to protect my investments. But you just have to look at the stats.

[Sugarphreak]

...

[Abeo]

Originally posted by Sugarphreak
The old "Buy Low, Sell High" saying does ring true, it is just that people always do the opposite... they buy in a hot market, then when a market like this comes along everybody is too skidish and burned from before to dare get into a down market.

I really do believe you have to treat buying a house like an investment.

so... listings up, prices up 8% from last year, a rush of buyers before the interest rate increase then a cooling, more interest rate hikes on the way, spring is over soon. This is not the time to buy, and it isn't a down market.


A year or so from now everybody will be saying "Oh I should have gotten in when I could"... oldest story in the book.

Is there a Realtor in the room? "buy now, before you get priced out!"

[barmanjay]

^^ ok


BUY NOW BEFORE YOU GET PRICED OUT OF THE MARKET!!!!!

[kaput]

.

[broken_legs]

Housing starts unexpectedly fall
Tavia Grant

Housing starts unexpectedly eased last month as builders broke ground on fewer single and multiunit dwellings, the latest sign of cooling in the market.

The seasonally adjusted annual rate of housing starts ebbed to 189,100 units in May from a revised 201,800 units in April, Canada Mortgage and Housing Corp. said Tuesday.

The report comes amid signs the country’s resale market is slowing. Most economists expect house prices will fall next year, after a blistering first-quarter for Canada’s real-estate market, as interest rates rise and demand ebbs. CMHC itself believes the pace of housing starts will ease later this year.

“Housing starts decreased in both the singles and the multiples segments in May,” said Bob Dugan, chief economist at CMHC’s market analysis centre. “The decrease in housing starts in May is consistent with our forecast that housing starts for 2010 will reach 182,000 units.”

Economists polled by Bloomberg had expected the pace of housing starts would be 202,000 units in May.

Canada’s housing market has been booming in recent months as buyers rushed into the market to beat the introduction of a new sales tax in Ontario and British Columbia, and ahead of expected rate hikes, which began last week. However, “the May [housing starts] numbers may suggest that the support from these factors is starting to wane,” said Paul Ferley, assistant chief economist at the Royal Bank of Canada.

Urban multiple starts fell 5.6 per cent, while single urban starts tumbled 14.1 per cent.

The biggest drop was in the Prairies, where urban starts shed 21.8 per cent, followed by a 13-per-cent drop in Quebec, a 12.9-per-cent fall in British Columbia, and a 2.7-per-cent decline in Ontario. Urban starts increased 23.3 per cent in Atlantic Canada.





Since housing only goes up in Calgary, this is a bullish sign.

[Cos]

Originally posted by kaput


This is exactly what people refuse to acknowledge - not only CAN prices go down, they already DID! And just in the last couple years too. What a short, selective memory we have.

What's especially interesting is that prices in Calgary were just gaining downward momentum when the recession hit and money became free overnight. The recession has arguably been very good for Calgary real estate - impossibly low interest rates stopped the correction before it was able to really take off.

Agreed. My place in the peak was worth just over 360,000. I paid almost 100k less than that. I missed the bottom where they were selling for 265,000 by a month and I had to pay an extra 15k.

Here is to hoping townhouses were hit especially hard. However if not I have my own place and I have no requirement to leave. I have a garage, condo fees are cheap, I have a patch of grass. That is all I care.

[rc2002]

Originally posted by broken_legs

Since housing only goes up in Calgary, this is a bullish sign.

Actually housing starts went UP in the month of May in Calgary, bucking the trend in the rest of Canada. Like I mentioned before, there are pockets of real estate that will resist downward pressure and Calgary is one of them.




CALGARY - Housing starts in May ballooned in the Calgary census metropolitan area compared with year-ago levels.

According to preliminary figures released today by Canada Mortgage and Housing Corp., total housing starts in the reached 862 units, up 79.6 per cent from 480 units in the previous year.

To the end of May, total housing starts have increased from 1,547 units in 2009 to 3,932 units in 2010.

In May, there were 634 single-detached units that broke ground, representing an increase of 66 per cent from the 382 units started in the previous year. To the end of May, new construction of single-detached units has improved from 1,175 units in 2009 to 2,804 in 2010, an increase of 139 per cent.

“Although the gain after five months has been impressive, the rate of increase is expected to moderate over the balance of the year due to higher mortgage rates, rising inventory levels, and comparatively stronger activity in the latter half of 2009,” said Richard Cho, CMHC’s senior market analyst for Calgary.

Multi-family starts in May, which include semi-detached, row and apartment units, increased from 98 units in 2009 to 228 units this year.

“New construction for semi-detached and row units has been brisk, representing the majority of multi-family production thus far in 2010,” said Cho. “Inventories for semi-detached and row units have been relatively low, providing builders an opportunity to start more of these types of units.”

Year-to-date, multi-family starts have reached 1,128 units, up from 372 units a year earlier.

Housing starts across Alberta’s seven largest centres totalled 2,127 units in May, compared to 962 starts a year ago.



Read more: http://www.calgaryherald.com/Calgary+housing+starts+leap+over+year/3126806/story.html

[broken_legs]

Touche.


Since the supply is going up, there must be more demand. More bullish signs for Calgary no doubt.

[lint]

Resistance is futile

http://www.calgaryherald.com/business/real-estate/Calgary+residential+sales+plummet+CREA/3160664/story.html


Calgary's residential MLS sales plummet in May: CREA

18.7% drop almost four times the national average

BY MARIO TONEGUZZI, CALGARY HERALD JUNE 16, 2010 COMMENTS (12)

Residential MLS sales in Calgary plunged at a rate more than four times greater than the national average in May, according to statistics released today by the Canadian Real Estate Association.
Photograph by: ., .
CALGARY - Residential MLS sales in Calgary plunged at a rate more than four times greater than the national average in May, according to statistics released today by the Canadian Real Estate Association.

The association, which represents 99,000 realtors working through more than 100 real estate boards and associations, said MLS sales of residential properties in Calgary dropped by 18.7 per cent from May 2009 to 2,133 units but the average sale price increased on a year-over-year basis by 9.2 per cent to $417,978.

At the national level, sales declined by 4.3 per cent to 47,369 units and the average sale price rose by 8.5 per cent to $346,881.

Across Alberta, CREA reported MLS sales fell by 16.1 per cent to 5,207 units and the average sale price was up by 7.1 per cent to $364,303.

CREA said the combination of changes to mortgage regulations in April and rising mortgage rates pulled forward a number of sales into April that would have otherwise taken place at a later date.

"Supply and demand has become more balanced in a number of major markets," said Gregory Klump, CREA's chief economist. "Homebuyers now have more choice and are likely to be in less of a rush to purchase than they were recently, so the amount of time it takes to sell a home is expected to rise in the coming months."

The number of months of inventory in May stood at 5.3 months across the country, up from 4.8 months a year ago. The nunber of months of inventory is the number of months it would take to sell current inventories at the current rate of sales activity.

"The number of months of inventory may rise further in response to easing sales activity and a further rise in the number of active listings," added Klump. "However, the number of newly-listed homes will ultimately retreat in response to a more competitive sales and pricing environment in a number of local markets. The outlook for the Canadian economy, employment, and mortgage market trends remain upbeat, so supply and demand will remain balanced on a national basis. Canada will avoid a U.S.-style home price correction."

CREA said new listings for Calgary increased on a year-over-year basis by 24.8 per cent in May to 5,150 units while in Alberta they were up by 16.3 per cent to 11,993 and by 18.0 per cent across the country to 92,763 units.

[email protected]

© Copyright (c) The Calgary Herald


Read more: http://www.calgaryherald.com/business/real-estate/Calgary+residential+sales+plummet+CREA/3160664/story.html#ixzz0r39fVagq

[kaput]

.