Anyone worried about real estate declining in Calgary?

[Toma]

As for Calgary's size....

"It's land mass covers over 5,000 square kilometers making it the single largest metropolitan city in North America."

And as stated...we have no natural borders, no limits to land....

But we certainly do not have the infrastructure and roads to cope with a higher population.... nor are they seemingly possible to build..... Calgary has to be the worst "designed" City I have seen. Probably casue no on expected us to end up this much bigger then Edmonton.

[urban.one]

In the medium to long term real estate always goes up (exceptions like detroit do exist though).

BUT look at a chart for any real estate market and theres always dips every few years of varying severity.

Take a look at a first time home buyer. Assume they can get $40,000 to $50,000 together for a down payment on a $450,000 home which is close to average today. A 10% decline in housing prices and your equity from your down payment is wiped out.

Thats not a big problem if you want to stay living in your house but if you also lose your job then all of a sudden it makes it harder to pay the mortgage but you cant afford to sell your house and lock in the loss.

A lot of people in Calgary who are in their mids 20s to early 30s have never seen anything but good times. Talk to anyone whos lived through a bear market and youll get a reality check. Forget that big bonus in January, youll be lucky to even have a job. Talk to someone whos been in a bad real estate market like toronto a decade or two ago whos had their house on the market for 6 months and hasnt had a single offer.

Im not predicting a crash in the Alberta economy but enjoy things while you can because were probably seeing a once in a lifetime type of growth in Calgary and Alberta over the current few years.

[sputnik]

Calgary really needs a major catalyst in order to spark a serious real estate crash. Something like oil going to under $40/barrel or something else that would cause a good portion of the workforce to lose their jobs. Interest rates moving into the double digits could also spark a serious decline as there are probably quite a few people in this city that would be unable to make their payments. That being said if interest rates climb most people would rather reammortize to 30-40 years instead of selling.

IMO the bubble just wont spontaneously burst in our current economy. There are MANY people just chomping at the bit to buy a house should prices drop and that demand alone can push them back up. In order to see a crash you really need lots of people selling and no one willing to buy houses at the reduced prices. Even in the crash of the 80s there were many people assuming mortgages and buying properties if they had the cash. Although many lost their houses, they also lost their jobs. Perhaps instead of focusing so much on the "housing bubble" we should focus on how many jobs in Calgary could potentially disappear in the next few years.

At the end of the day. Real estate for me is a long term hold. I maintain an emergency fund to ensure I am not one paycheque away from being forced to sell and I buy within my means. Should there be a correction in the market I feel that my wife and I would be able to keep our house with some minor budget changes and that the possibility of seeing a return to current prices would only be a few years down the road (if even that).

I am not saying that Alberta is going to keep on with the pace that it is currently going (i would like things to stabilize), but I dont see dark clouds in the horizon as well.

[Toma]

80% of Alberta's economy is GAS and not oil, and it has already fallen in half....

[sputnik]

Originally posted by Toma
80% of Alberta's economy is GAS and not oil, and it has already fallen in half....

Define "fallen in half". Exports? Prices? Production?

Today AECO spot day natural gas for Alberta is trading at $6.95 CDN/GJ. On NYMEX the near month future prices for Henry Hub natural gas are trading at $7.552 USD/MMBTU. Not bad considering a couple of winters ago when gas was trading at around $9 CDN/GJ there were segments on the evening news about the "spike" in prices.

Exports are down slightly because of the sheer amount of gas being purchased for powering and generating steam for the oilsands projects. I really dont consider that a loss considering the fact that the gas is still being extracted and sold.

I'm not sure as to what the production levels currently look like, but I am sure that we will know once the eastern US gets their annual heatwave.

[Toma]

Define half.... like it was $14 a GJ a years ago (or was it 2?), now its $7

A buddy of mine was lucky, sold his Gas company then. Today, he says he would still be sitting on it....

Housing and jobs lag gas of course, so the big housing job moves happened delayed, after the gas spike. The Party is over for gas, and talk to anyone down in Medicine Hat area, and they will tell ya they are hurtin', lay-offs, no work, rigs not drilling....

[Canmorite]

Should be an interesting summer for Natural Gas. I don't know if we'll hit $13-14 again but ya never know. Looks decent right now.

[sputnik]

Originally posted by Toma
Define half.... like it was $14 a GJ a years ago (or was it 2?), now its $7

A buddy of mine was lucky, sold his Gas company then. Today, he says he would still be sitting on it....

Housing and jobs lag gas of course, so the big housing job moves happened delayed, after the gas spike. The Party is over for gas, and talk to anyone down in Medicine Hat area, and they will tell ya they are hurtin', lay-offs, no work, rigs not drilling....

In 2005 there was a run of double digit gas prices from Sept-Dec 2005. Around $10 for most of it but some days the settles peaked around $12-13 on some good days. We were also in the heart of a pretty bad hurricane season and prices at Henry Hub really pushed up the natural gas prices worldwide.

Last year daily settles for AECO gas ranged from $3.50-$8.00.

2007 seems to be picking up where 2006 left off and the winter prices were a bit higher this year than last. I guess we will have to wait and see if a hurricane hits the gulf of mexico this fall/winter.

[Super_Geo]

Originally posted by Toma
The Party is over for gas, and talk to anyone down in Medicine Hat area, and they will tell ya they are hurtin', lay-offs, no work, rigs not drilling....

Not really... the big producers are still going strong. There's a bit of a waiting game going on with the contractors. They are getting hungrier and hungrier and pricing is starting to fall.

My biggest natural gas project is approaching the construction phase very, very slowly (as opposed to the usual pace of 'as fast as you possibly can') because if it starts later into summer the construction companies should be really hungry for work by then and will do it for a noticable drop in price.

I've already started getting calls from companys used on past projects asking if there's anything they can bid on. Let graft season begin

And amen to the end of paying welders $130/hr... the pricing for contractors went straight fucked up last summer.

[l8braker]

Originally posted by Super_Geo
Not really... the big producers are still going strong.

EnCana reported $1.8B 1st quarter cash flow yesterday.

[evilution]

Originally posted by Toma
There WILL be a correction. How severe is unknown. It has happened EVERYWHERE else, it is Naive to say, "oh, wait... but this is Alberta, we are different".

I agree 100%..

Basically, the calgary market is cannot continue to go up. Housing prices on average only appreciates at the SAME rate as inflation. Last time I checked, inflation hasn't been doubling in calgary, and neither are our incomes. Whenever there is a new community, or new condo development, think about how many buyers are actually going to live there, or are they speculating / flippers? Eventually, the house has to get sold to some poor sucker. I'm just guessing that whoever said "there's a sucker born every minute" didn't account for the population growth. But in the end, that sucker's salary isn't increasing at a rate to keep up with housing prices, and therefore, in the end, the buyer will just not buy. Supply will grow more than demand, and prices will fall. Simple economics.

YES, 5 years ago, I would have to say Calgary (and edmonton for that matter) have been undervalued for the longest time, and deserved an increase. As housing prices started to rise, people starting becoming captivated by the thought of making big, easy money, and became ignorant.

for a good read on this topic check out http://www.calgary-housing.blogspot.com/
He stopped writing now, but there are TONS of good reads / graphs / ratios / comments (good debates in them)..

At least read DEC 10, posting. It's a great summary.