Imminent Housing Crash

[04Terminator]

Emotional investing aside, there is simply no evidence of a housing price problem. Looking at long term data, it's clear the "problem" was the bubble in ~2006. Simple long term technicals show a healthy market, back on track. Housing is easily out performing inflation long term, which IMO is both a blessing, and a problem, depending on point of view.

This is the MLS Home price index. Choose Calgary, as far back as it will go, single family residential, and draw some basic trend lines. Looks fine. The issue was the bubble in 2006-2007.
https://www.crea.ca/housing-market-s...ndex/hpi-tool/

Here is the Canadian Real Estate Association average home prices for all homes in Calgary. I encourage you to plot these and see for yourself. Again, the issue is clearly the bubble on 2006-2008, and we are now back on track.


Lastly, here is the Teranet-National Bank House Price Index, again, looks reasonable.



As for sales volumes and realtors. Who cares? Lets be real, housing is not supposed to be a hedge-fund, or huge speculative market for foreign tax evaders. Homes are supposed to be for people and family's. A slow but steady approach is much better for most Canadian's instead of the mortgage fraud fueled orgy of the boom years.

Rising rates (yes, rates are up, ESPECIALLY the discount you can negotiate is less), tightening rules, down payments, shorter terms etc all clipped the housing market a little, which is a good thing.

Housing is not supposed to be day trading, and THANK GOD those days of speculators signing paper work on Monday, then flipping on Friday and making $10k are gone.

Or how many of you were approached by shady brokers, offering you $10k to use your good credit to finance a property at elevated cost, so that someone that could not finance, could assume? Housing in Calgary is more solid than it has been since 2004, and is now supported by fundamentals. Though the UCP is really trying hard to destroy those too.

[Buster]

Judging housing isn't as simple as just looking at pricing.

You have to look at some relevant ratios: PE being one (ie Price to Rental Income), price to GDP, price to unemployment, price to income level, etc.

[ercchry]

I think once Alberta accepts its new normal things will be just fine. I look at a lot of deals from Ontario, and look at the boom out here. TO condos are about double as Calgary’s DT equivalents... small towns of less than half of Calgary’s population with 1.5hr+ commutes to TO are on par price wise with calgary yet income out here is just sad. I’m talking about welders with 20yrs experience making $21/hr, professionals with letters behind their names and senior level exp making under 6 figures, yet it’s normal and housing costs are $$$, the alt and private markets are growing like crazy and everyone is just accepting it.

[corsvette]

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I don’t recall ever seeing it this bad in Calgary since I have owned a home. Purchased my first place in 1995, interest rates were triple what they are now and things still seemed better then.

Being a realtor now, I have never seen it this slow.

Talking to other realtors who have been in the business since the 80’s they say this is the worst it has ever been.

Discussions I have had with friends that are still in O&G say they expect things to get worse before they get better.

These are people at Executive levels.

The Realtor that sold my home said the same thing (been in the industry since 1986). Took us over a year to sell. Definitely a buyers market and I'm super glad we finally sold. Moved to the Okanagan, real estate not suffering out here one bit.

[89coupe]

If you are planning on buying I would say 2020 will be the year to do it.

I think by the end of 2020 you will start to see things turn positive.

[ercchry]

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If you are planning on buying I would say 2020 will be the year to do it.

I think by the end of 2020 you will start to see things turn positive.

This keeps us more or less on track for the classic 5yr cycles we see in RE

[ExtraSlow]

It's my bet that any decline in average housing prices in Calgary will be small and gradual. But I also don't see any levers for average real estate prices to go up much in the next five years.

But for your primary residence, I say, just live your life. If you have enough money to own investment or vacation properties, then you hopefully have more financial acumen than me anyway.

[jwslam]

Probably already said somewhere in the last 50 pages but here is my stance and I don't understand why anyone would argue.

For your primary residence, real estate is an EXPENSE. It is not an investment until you're 25 years out and mortgage free (rent equivalent).
Whether you make 200% gains or it goes down to $0, the mortgage you pay needs to come out of your pocket anyways.

The purpose of "timing the market" would net you a better or worse home for the same money, but at the end of the day you are shelling out money to have a roof over your head. Your benefit comes from 25yrs from now when you shell out $0 rent.
If your property goes down to $0: so what, you would've spent that money on rent anyways and it would've been washed away.
If you break even: Great! I've have not gained any money in terms of TVM for inflation, but it's more than nothing.
You make 200% gains: So what? You still have to have a roof over your head. You gonna sell your $400k house that inflated to $1.2m, and now go live in $400k taking $800k gains and running? By that kind of inflation you'd be looking at a bachelor suite.

[ercchry]

I’m more worried about timing the liquidations of the starter homes to consolidate into the forever home, maximizing equity growth and also timing sales and purchase with an upswing that hopefully increases prices of the entry market with the high end trailing behind... time will tell, we’re comfortable enough with our current situation so in no rush

[Buster]

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I’m more worried about timing the liquidations of the starter homes to consolidate into the forever home, maximizing equity growth and also timing sales and purchase with an upswing that hopefully increases prices of the entry market with the high end trailing behind... time will tell, we’re comfortable enough with our current situation so in no rush

Cant time markets reliably. RE is even harder.

[ercchry]

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Cant time markets reliably. RE is even harder.

Pretty easy to time an exit though. Rest of the variables are already set. No need to find peak, neither property currently is even remotely underwater... so it’s mostly just an exercise in trying to maximize equity in the forever home

[Buster]

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Probably already said somewhere in the last 50 pages but here is my stance and I don't understand why anyone would argue.

For your primary residence, real estate is an EXPENSE. It is not an investment until you're 25 years out and mortgage free (rent equivalent).
Whether you make 200% gains or it goes down to $0, the mortgage you pay needs to come out of your pocket anyways.

The purpose of "timing the market" would net you a better or worse home for the same money, but at the end of the day you are shelling out money to have a roof over your head. Your benefit comes from 25yrs from now when you shell out $0 rent.
If your property goes down to $0: so what, you would've spent that money on rent anyways and it would've been washed away.
If you break even: Great! I've have not gained any money in terms of TVM for inflation, but it's more than nothing.
You make 200% gains: So what? You still have to have a roof over your head. You gonna sell your $400k house that inflated to $1.2m, and now go live in $400k taking $800k gains and running? By that kind of inflation you'd be looking at a bachelor suite.

It's best to consider a mortgage and your property as different things. People think of their mortgage in association with their house - easy to see why.

Think of your home equity as an asset class just like placing capital in any other asset class.

Think of your mortgage as simple leverage and like being short fixed income. Your mortgage interest is just an expense obligation.

Then your other asset classes (stocks and bonds) are simply leveraged to the amount they exist relative to your mortgage.

It's why I hate RE as an investment class now, hated it in the past, and will continue to hate it in the future. The asset class tracks inflation and you are only making money by massively leveraging a relatively illiquid asset. Yuk.

[ercchry]

I personally enjoy it due to how dynamic a physical asset can be... and one that is so easily leveraged. But I like and am able to be more hands on with it, which not everyone can or should be. An insured, owner occupied rental conversion can have such massive ROI. Nothing in the markets will do that by purely having the resolve to grind at something. Anything with returns like that in the market are purely a coin flip

[bjstare]

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If you are planning on buying I would say 2020 will be the year to do it.

I think by the end of 2020 you will start to see things turn positive.

“now is a great time to buy, things are going to go up soon”
-every realtor, at any time

[Buster]

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I personally enjoy it due to how dynamic a physical asset can be... and one that is so easily leveraged. But I like and am able to be more hands on with it, which not everyone can or should be. An insured, owner occupied rental conversion can have such massive ROI. Nothing in the markets will do that by purely having the resolve to grind at something. Anything with returns like that in the market are purely a coin flip

But i you are hands on, then it's a "job" and you have to factor in compensation for time and time-on-call. That's not an investment per se.

By owner occupied rental conversion, I assume you mean converting a previous residence into a rental?

[ercchry]

Yes... a high ratio owner occupied to rental. Sure I guess I can factor that in. But if you are managing your own stocks or whatever vehicle you use to invest I would hope you are spending time on research... so gonna call that one a wash

[Misterman]

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I think once Alberta accepts its new normal things will be just fine. I look at a lot of deals from Ontario, and look at the boom out here. TO condos are about double as Calgary’s DT equivalents... small towns of less than half of Calgary’s population with 1.5hr+ commutes to TO are on par price wise with calgary yet income out here is just sad. I’m talking about welders with 20yrs experience making $21/hr, professionals with letters behind their names and senior level exp making under 6 figures, yet it’s normal and housing costs are $$$, the alt and private markets are growing like crazy and everyone is just accepting it.

I'm not super familiar with Ontarios job market as a whole. But here in Sarnia, they are making very good money in relation to average house prices. Their market has been going crazy too though. A lot of people who made bank on the real estate bubble in TO, have sold and come to Sarnia to pay cash for a house and make better money. Those buyers are driving the market up here. I still can't believe what they're paying me to fly over here.

[Buster]

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Yes... a high ratio owner occupied to rental. Sure I guess I can factor that in. But if you are managing your own stocks or whatever vehicle you use to invest I would hope you are spending time on research... so gonna call that one a wash

Right - the advantage to RE as an asset class has nothing to do with the asset class, and everything to do with leverage (ie risk). And the liquidity risk is nasty.

On managing your own stock portfolio: that's not profitable over the long term. The data is pretty clear on actively managed accounts.

[ercchry]

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Right - the advantage to RE as an asset class has nothing to do with the asset class, and everything to do with leverage (ie risk). And the liquidity risk is nasty.

On managing your own stock portfolio: that's not profitable over the long term. The data is pretty clear on actively managed accounts.

Well, then the future looks bleak! 5-7% returns for all... well, before factoring in those MERs

[Buster]

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Well, then the future looks bleak! 5-7% returns for all... well, before factoring in those MERs

Nothing wrong with targeting high returns. But you have to risk adjust everything, all the time.

And XGRO charges 0.18%