The more you pay for oil / gas, the more you put your O&G investment earnings into making your house / car / etc. energy efficient.
“If you expect to be a net saver during the next 5 years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.”
“To refer to a personal taste of mine, I’m going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the ‘Hallelujah Chorus’ in the Buffett household. When hamburgers go up in price, we weep. For most people, it’s the same with everything in life they will be buying — except stocks. When stocks go down and you can get more for your money, people don’t like them anymore.”
“It seems everybody says [the recession] will be short and shallow, but it looks like it’s just the opposite. You know, deleveraging by its nature takes a lot of time, a lot of pain.”
“What we learn from history is that people don’t learn from history.”
Last edited by moahunter; 16-12-2014 at 12:20 PM.
Holy crap man, comparing a consumable product like hamburger to investments where you put your savings for a rainy day or retirement!!!! Why don't you or Buffet go buy some Russian stocks then...it falling like stone.
On real estate, as house prices rise agents forever talk of the opportunity if not urgency to buy however in the 1980s as real estate prices dropped I never once encountered a real estate agent that said don't buy because the prices are falling. If prices start to fall again just watch them find reasons for you to buy. Personally I think those reasons will be more reasonable than the ones they use to entice young couples to buy into a bubble.
Do you get the difference between consumption and saving, as I said above? It is common sense 101, really.
Also, Buffet actually talked the same $hit about single stocks too, for instance read 2011 shareholder letter and his comments on why he bought IBM shares....if you follow his logic you have to buy loser stocks, very clear even from what you posted. My last comment on this, hopefully people reading this don't get into Buffet trap....
Last edited by FamilyMan; 16-12-2014 at 07:57 PM.
^ First. My idol? No. Buffett is highly quotable and sees the his part of world quite differently than the average person. His expertise is money and some human psychology. If I had an idol it would be among guys like Milton Glaser, Harry Hopkins, Edwards Deming, Burt Rutan, Scott Adam and other unusually creative thinkers.
On consumption vs savings. Yes I understand. Have everything from economics to taxation theory courses in a past life.
On Buffett's annual reports. Have read them all. I used to spend my lunch hours in the library reading annual reports, fin post cards, Bank Credit Analyst, and on and on.
Last edited by KC; 17-12-2014 at 09:20 PM. Reason: Demoted Sir William Beveridge. I'd forgotten about his eugenics record
The sad fact is you guys were expecting more on the government's dime. Proper retirement savings should include a large enough portfolio to cover long term assistance and health care.
Government pension, GIS and OAS should only cover 25% of your retirement expenses. 25% should be via company pension, 25% via RRSP, and 25% via other savings. The 4 legs approach, keeps the table upright, even if one of the legs gets knocked out.
Assisted living at 5k per month is reasonable if that includes the living accomidations and meal costs. Health care isn't cheap.
However, we weren't expecting financial aid but surprised at this separation risk is a common occurrence due to facility design / outdated facilities / staff, etc and so I feel sorry for all those older couples that have to separate from each other in their final days or months. So budgeting for only $5k / mo. is nothing in such circumstances - people may need to be ready with a lot more in savings for this risk. (Oh, and there's stuff like $15,000 wheelchairs, plus thousands in costs for hospital beds, lift systems, etc. even when resident in long-term care facilities.)
After 50+ years together I don't think my parents thought that they would face the risk of having to leave each other because of differing care needs. Their savings allowed them to hire private care staff. Also, an advantage my parents had was their health. My father had never stayed a single night in a hospital in his eight prior decades and so benefited from minimal prior health care expenditures to the point of his fall and becoming paraplegic. At that point life changed dramatically and he immediately relied on 24 hour care in a facility - care that lasted for many years. This highlights the need for savings/insurance beyond what your health and lifestyle would generally predict for you.
One last point. My father had a company pension but his original employer had been bought out by a larger company which was bought out again... Then that large company failed. So his already small pension - medical benefits - were cut back as a result. So that's a good example of one of those legs being kicked out.
Last edited by KC; 17-12-2014 at 01:04 PM.
In the facility the inlaws are in, only a small percentage actually pay the full costs of their care. We have to pay the full costs, or have mum & dad separated. That was the only point I was trying to make.
^ No, I think it was an apt response to that rather insensitive comment
If dad hadn't had a stroke, they'd still be in their home, living their retirement and dad could have remained the caregiver to mum. Dad has savings and a fairly decent pension. They could have lived that way in perpetuity
However in the blink of any eye things changed. They had to move to a facility that could provide structured care, medication administration, proper meals, and 24/7 medical support. It was literally impossible for them to stay in their home. They are not in a retirement villa or a gated 55+ community, they are in a place that provides them with high levels of support to help them live with their serious medical conditions. This was obviously never part of the plan. And when we explored avenues to get them the support they needed (support that AHS told us that they would require) they told us that that they needed to go to an assisted living facility and because of the nature of their ailments they'd have to be split up, or that we'd have to cover the full costs. Even though it likely costs less to have them live together, and separating them would most likely have reduced both of their life expectancies significantly.
It's easy to say you should have X put away for retirement, and you should have multiple revenue streams. Well everyone knows that. And we all know that long term care is expensive. And I'm certainly not complaining about the current setup.. it's working well for the moment and everyone is relatively happy. I was just pointing out that the way the system is set up, it has the potential to break a family apart or hold them hostage financially, and when dad was in his prime earning years (mum was a stay-at-home) the thought likely never crossed their minds that at 80 years old, all of a sudden the cost of their retirement would triple (or more).. and even with their ailments, they have the potnetial to still be around for a long time yet (longevity runs in that side of the family) so these high costs for care could go on for a long long time
What if we didn't have the financial means to come up with the solution that we did ? I bet a lot of people are in that situation.
Last edited by 240GLT; 18-12-2014 at 11:47 AM.
^ I think this issue speaks more to the decades of mismanaged governments who dreged all the money out of every social system we have to buy up short-term votes, than it does to the housing market.
Even though I won't benefit from a decrease in housing prices, theres some good to come out of it. Our younger generations need to get a financial break for a change.
^ yes, back on the topic of house prices.. I am still amazed at how much they have gone up. If I was the same age and financial position I was in 12 years ago, and trying to buy a house in 2014, I would not have been able to afford even the modest bungalow that I own in Parkdale.
Of course, people will need to adapt.. there's always going to be a need for an entry level property in around the $120k range for young folks to get into the market and start building equity. Unfortunately they can't get a house anymore for that price so they'll need to settle for some sort of condominium arrangement.. but most will eventually gain equity, trade up, and so on.
I don't think you'll see house prices drop in any appreciable way, though. If the bottom falls out, some people may need to fire sale their homes, but most will hold on.
Yeah I doubt a major drop will happen in Edmonton. Maybe a minor, but there's too much growth here for prices to massively fall. I can see it happening in Toronto and Vancouver though.
There was an interesting article in the Globe and Mail the other day. Says how you shouldn't buy a home unless you're comfortable with the idea of living in it for at least 10 years, as you might need to weather out a price fall and rise. Something maybe to consider for those in the situation of buying an entry-level condo and hoping to trade up to a house soon.
I've always agreed, re: living long term in a home you own
I know so many people that move and buy a new place every few years
With all the costs associated with buying and selling real estate it's hard to see how you'd stay right side up doing that
In 2003, RBC took my annual income, mutiplied it x 3, and stated that this was the maximum house price wife and I could afford. Not a penny more.
Although the banks don't really operate this way anymore, it's still a good rule of thumb. Jobs are not that stable anymore, yesterday's successful family business can become worthless overnight, stock market crash, income properties not bringing in enough income, etc. But the mortgage and debt still has to be serviced.
The world is full of kings and queens, who blind your eyes then steal your dreams.
It's heaven and hell!
^ with affordability at 3.7 years in alberta, possibly less including the sticks in rural alberta? And an average family income at $92000 in Alberta according to 2003 theory max average joe should not buy for more then $276000. Not much of a house, but lending costs have come down.... What happens if we stay in a fairly low interest rate environment as Japan has bee in for the last 20some years?
^^ or skip the brand new build with the granite & stainless and bonus room, buy something you can afford. Most people don't want to do that though
My advise would be that if at all possible.. scrimp, save and do what you can to get your 25% down so that you can get an uninsured mortgage. Most people with insured mortgages are upside down for years on their homes because of it
^ Very very true and good advice. The 20% down makes a difference, and lets an owner have 'skin in the game'.
The world is full of kings and queens, who blind your eyes then steal your dreams.
It's heaven and hell!
Get something you can afford. Buy a condo, then trade up when you can. Live within your means. People seem to want it all and want it now, these days... keep it simple and bide your time.
I bought my second house with 20% down and it actually worked out worse with mortgage rates albeit very small but paying 10 basis points higher through my wholesale lender.
I agree with statements about not over extending ourselves, but I would advise people to buy something nice vs a project, unless someone has major bankroll for future renovations.
This article below so far has over 900 comments! People take these forecasting scenarios very personally, even though most people would say that no one can predict the future. I like his comment on oil forecasts - mainly because I made the very same point on the what are we going to do... oil price collapse thread.
Face it, Canada's housing market could fall like oil: Don Pittis
Why industry experts can't seem to foresee what seems so obvious in retrospect
By Don Pittis, CBC, Dec 16, 2014
"...This is the most disturbing lesson from the recent fall in oil prices, that the professionals — the people who have all the historical data on production and demand — seemed as surprised as the rest of us when oil plummeted by half. The second most disturbing lesson is that after the decline had happened, economists at the big international banks acted as though it was an inevitability, sagely predicting further declines.
Where were they this summer when oil was trading at $100 US? ..."
"There have been voices willing to take a possible fall in prices seriously.
... A more moderate voice is Ian McGugan, who observes that Poloz's willingness to depart from the "see-no-evil, market-knows-best boilerplate" shows he may be more worried than ....
McGugan mentions something I have called the... "
Last edited by KC; 21-12-2014 at 09:39 PM.
I posted that article a couple pages back in post #199 here in the housing tumble thread. Simply put, the way housing (and most importantly wages & household debt) is going, it's not sustainable.
I'm a 31 year old, currently renting with my spouse in Edmonton. I refuse to buy in this market. 1960s bungalows in need of upgrades going for 450k+? I don't ever want a fixer upper considering how much tradespeople charge in this Province.
I currently have about 350k cash, but feel I am better off renting, getting good returns in the stock market. I'll just keep piling up my money. I'm hoping for a correction in the next year or two.
A colleague told me he bought his south side bungalow for 160k in 2002 and comparable houses on his street are now going for 480k. Ridiculous.
I just don't see much value in The Edmonton housing market right now. If I have to keep living in my 2 bedroom condo, which lets us both walk to work, fine by me.
You and your spouse are very fortunate to be pulling in your 1/4 mil a year income in alberta.
House prices had a big correction in 2008/2009/2010 a 20% to be a bit more precise. A man of successful investing under ones belt, what really are the odds for a BIG double dip on real estate?
2006/2007 prices ran up quick!hence a correction but 7 years of slow growth; too many people with skin in the game. People would refuse to sell except the desperate as one of the previous articles pointed out.
Remember those 1960 bungalows are not going up in value because of 50 years wear and tear on the shack but the land it sits on. These are desirable neighborhoods, but something that many people overlook is the cost literally in edmontons downtown. I'm sure we must have one of if not the cheapest costing areas 4-6 blocks out of downtown in North America, especially when one factors in average wages, unemployment levels ect.
I don't know lot values in the Deep South, but I was looking in griesbach and $450000 can buy a damn nice bungalow there. Granted not walking distance to work( basic lot value $150000)
I live in mccauly a 6 min walk to the law courts building,10 min most locations in downtown,a person can pick up an average city lot for $150000 easily with a few going for 115ish in the spring. Depending on your needs for space $200 sq ft build price can build same fit and finishes as the condo you live in.
I am 32, could have been mortgage free, but instead choose in the last year to renovate( I'm a carpenter and an amazing one at that lol)( keeps my costs down)im on track spending $175000 easily, renovating my 1908 victorian 2story home. I bought my crackshack for $200000 4 years ago, condos would never work for me, but I see the value in downtown.
Blatchford when proposed was a great design, going to the dogs quick,way more potential in neighboorhoods like mccauly on the front step of downtown
Additionally, if this will be a starter home and not your final, most costly, "dream home" then that acquisition could be seen as a diversification move in the sense that it gets you into the housing market, but if it takes all you've got then of course you're putting all your eggs in the housing market until you rebuild your portfolio.
As for timing the market, no matter what, with such a large purchase you're essentially forced into it. Do so knowing that you can't predict the future but you can maybe identify the very rare period of extreme craziness in terms of manic or depressive states. Otherwise it's hard to outsmart the thousands of other people, institutions and businesses driving the market in terms of costs and setting replacement costs.
Last edited by KC; 23-12-2014 at 07:29 AM.
This is hilarious. Anyone under 30 will never see a government pension. The baby boomers will suck our nation's reserves dry. We will pay our entire lives into CPP, and get nothing back.
Company pensions are also becoming a thing of the past rapidly. With the demise of unions, benefits are collapsing. Most places are shifting to RRSP contributions, and you can expect those to be the next to go.
In this world as a younger person you can only rely on yourself. I don't expect a dime from the state, and I don't expect to have a good company pension - especially in AB where people jump around jobs so much they never build up the time to get serious payments upon retirement (right now I get RRSP contributions and that is it). I expect to retire 100% on my own savings.
Even after that, investment returns are projected to outpace benefit payments decades in to the future:
So essentially, even up until 2050 when the vast majority of the baby boomers will have passed away or will soon and will no longer be drawing benefits, the total size of the fund will continue to increase.With the legislated contribution rate of 9.9%, contributions are projected to be more than sufficient to cover the expenditures over the period 2013 to 2022. Thereafter, a proportion of investment income is required to make up the difference between contributions and expenditures. In 2050, 27% of investment income is required to pay for expenditures.
Now, you can make an argument that CPP alone is not nearly enough to retire comfortably on without having other savings, pensions etc., and you'd be absolutely right. But arguing that the CPP is going to just go poof? There's no basis whatsoever to do so.
Some trivia on the issue of house prices. My parents moved in the early 2000s and bought a life lease. We sold their house only to see it subsequently rise in value by 300%. The proceeds went for a life lease at a long term care facility so there was zero growth in value.
Last edited by KC; 23-12-2014 at 11:48 AM.
I get your point about equities, impossible to time the market, i have a very large chunk of it in cash right now. Im going to stick my TFSA in a peoples trust TFSA earning 3%.
I think the concept of a starter home is ridiculous. We're good with a smaller 3 bedroom home forever. If a baby comes along, we'll be ok, spouse gets 1 year fully paid mat leave.
^ Have you considered not trying to time the equity market, and buying some good quality Exchange-Traded Funds (ETF's) and/or common shares of blue chip companies - e.g.) Big-six Canadian banks, Enbridge, Telus, BCE, Walmart, McD's, Proctor and Gamble, etc.
These corporations are making a killing year after year, and have kept shareholders happy for decades.
Hold em in a TFSA and forget em for the long run, for at least 10 years. There are several discount brokerages where a TFSA/RRSP/RESP can be set up e.g.) Questrade
Cash is losing value with inflation, and 3% won't keep up with inflation.
And housing has had a ridiculous run-up in the last decade. I personally think housing is now more of a risk than the stock market. At least in the stock market you can diversify across different sectors, geographies, industries etc. If the Alberta economy tanks, imagine the impact this will have on the price of your house.
Last edited by Bill; 23-12-2014 at 03:24 PM.
The world is full of kings and queens, who blind your eyes then steal your dreams.
It's heaven and hell!
The reason I'm putting my money in a high interest tfsa is for the purposes of having the cash safe in order to get in the housing market.
My RRSPs are full speed ahead (about 90k) with mawer funds. I also have about 40 k of unregistered funds in the mawer tax efficient balanced fund.
If I buy a house at 400k and it loses value, I won't care since I would have paid cash, live an extremely thrifty lifestyle, eventually have a combined income of 350k and still invest long term like crazy.
Last edited by Johnny199r; 23-12-2014 at 03:33 PM.
^ Sounds like you've got a good plan
It's heaven and hell!
Virtually any major bank should be able to do the same. All my RRSP, TFSA, and non-registered investments are in a self-directed account from Scotiabank. I can buy whatever ETF's, equities, and mutual funds I want, when I want (that are freely available without salesmen and commissions, anyways).Originally Posted by Bill
If you're looking for something that's near-cash, won't risk much of your principle, and easy to buy/sell then maybe look at XSB: https://www.blackrock.com/ca/individ...ssthrough=true
It pays out monthly, and the yield is around 2.5%. XBB pays a bit higher, but your principle is more at risk with it.
The CPI is generally around 2% over the past 20 years, not 3%: http://www.statcan.gc.ca/tables-tabl...con46a-eng.htmOriginally Posted by Bill
I like how the first headline says "will" and not 'may'. People just need to realize that they shouldn't get caught up in a panic to buy when prices rise or a panic to sell when they fall - and they need to have contingency plans and funds. Also, while a lot of people have told me here that falling house prices are not good in any way, apparently flat to slightly rising prices somehow become "increased opportunity" according to the CEO of Royal LePage. The second article is good and it bashes the doom and gloomers but doesn't attack the far larger crowd says buy, buy, buy - house prices are going to the moon.
“In contrast to many parts of Central Canada, we expect increased opportunity for home buyers in Western Canada, but that opening is unlikely to last,” Mr. Soper said.
“Over the longer term, we foresee a return to regional home price appreciation that is above both the historical average and national trends in general, when energy markets recover,” he added, which, of course, means there’s a buying opportunity if you’ve got the money." - Royal LePage chief executive officer Phil Soper
How the oil drama will sway the price of your home
MICHAEL BABAD, The Globe and Mail, Jan. 14 2015
Nobody blows bubbles like these real estate writers
Garry Marr | October 2, 2014
Last edited by KC; 15-01-2015 at 11:08 AM.
Good article - odd that they didn't provide the inflation adjusted house prices for clarity. Posted back on May 18, 2007...
"Is that kind likely to happen again? I think it's far less likely. The economy is inherently more stable ... and what's driving growth in Edmonton and Calgary is sustained capital investment in the oilsands. ... After living through '81/'82, I'm still reasonably optimistic that we'll get the policies right."
A very good article here!!! Too bad Hicks didn't also show the inflation adjusted prices on his 1981 purchase.
Will Edmonton home values plummet with price of oil?
Graham Hicks , EDMONTON SUN, JANUARY 09, 2015
"In 1981, I bought a house here for $120,000. Twenty-two years later, I sold it for $135,000.
Phase 1 of Edmonton’s great catch-up, going from one of Canada’s poorest big cities to one of its richest, was 2000 to 2007. House prices moved up from $125,000 to $338,000, mortgages were an affordable 6% to 7% and oil moved from $30 to $73 a barrel."
"... Hope for the best. Prepare for the worst."
Relationship of Edmonton house prices to the price of oil.
Date Average house price (unadjusted) Average price of oil for previous year (adjusted to 2014 dollars)
1981 $91,438 $107.30
1986 $74,306 $59.10
1989 $89,017 $29.73
1990 $101,014 $34.91
(Sources: Adjusted oil prices from InflationData.com, historical oil prices; Edmonton house prices - Edmonton Real Estate Board statistics via Chrisdavies.ca)"
Last edited by KC; 20-01-2015 at 09:50 AM.
The first article doesn't say much (probably as all forecast discussions should be) but it does have pretty charts and graphs... It does mention Edmonton and Calgary though. What concerns me is the extent that people are wondering how long oil prices can stay at the current level. It wasn't that long ago that the current price was a pretty good price and inflation hasn't been all that bad so, maybe it's just a case of lowering our expectations and saying it was another great bubble while it lasted.
Will oil’s big drop pop Canada’s housing bubble?
by Megan McArdle, Bloomberg News, Jan. 27, 2015
http://business.financialpost.com/20...ousing-bubble/Calgary house market braces for fallout from oil prices
by Susan Pigg, Jan 23 2015
"As of this week, however, sales and listings for the Calgary Real Estate Board — updated daily at www.creb.com — were showing signs that the new reality of low oil prices is hitting home.
As of Thursday, home sales were down 34.8 per cent — to 549 houses and condos from 842 over the same three-week period a year ago. And new listings soared by 42.8 per cent year-over-year, from 1,584 in the first 22 days of last January, to 2,262 properties this week."
Last edited by KC; 28-01-2015 at 03:17 PM.
^ There is definite concern about the beginnings of panic selling in Calgary as people rush to list their properties before a possible steep decline in prices. The increase in listings then in turn exacerbates the price decline.
I even wonder if the daily (compared to monthly as in Edmonton) reporting of sales, listings and prices helps contribute to the sense of panic. Kind of like the daily greed, fear and over-reactions that drive equity markets.
^ or it may turn out to be a smart move, like when you move your investments to the safety of cash to avoid a major price correction in stock market...especially if you don't plan to live in AB for longer term as a house price recovery might take many years, like what happened previously here.
Just a casual observation on ComFree, but looking at a few properties in my own area (typical 3-bed detached burb houses) the prices are around the 390-415K mark. That's up by a few percentage points of just a few months ago.
Nisi Dominus Frustra
ComFree is full of dreamers overpricing houses.
On my last home sold on ComFree, I got 10% over two appraised values done by a professional home appraiser and a real estate agent. I also saved a bundle in commissions. Pocketing 15% more on the value of your home makes me a believer in ComFree.
Advocating a better Edmonton through effective, efficient and economical transit.
I've listed and sold homes on Comfree in the past. It just seemed to me that too many people over valued their houses and probably didn't have appraisals done at all. Back when they couldn't put their listings on the MLS I felt ComFree lost exposure because of the number of unrealistic priced homes on it.
After the fact, people criticize moves like that - IF all turns out well. If not, they just stay quiet. We can't predict the future and we can't predict the impact of change on any individual or family. They are almost always pretty much left to fend on their own. From the position of safety (job security, wealth, age, etc.) it's easy for people and politicians to play the confidence game to give out advice but they are no where to be found to help the individuals which get the short straw.(Just look at the macro moves in the states in their crisis. Banks and bonuses were saved but little to nothing done for the laid off homeowners for months and months until it was too late for many.) Basically, everyone is faces unique circumstances and they need to think rationally about the best move for themselves.
Worse, as I've said there will be those that urge calm or give bad advice while they flee. Like the port authority telling people that started to leave the world trade centre to stay put or go back in. Or the european leaders that talked of the safety and security of the banks while they and their friends got their money out.
Last edited by KC; 29-01-2015 at 08:35 AM.
From The Globe and Mail, Feb 1 2015:
http://www.theglobeandmail.com/repor...ticle22739292/Alberta’s real estate woes threaten the rest of the country
The “soft landing” that Bank of Canada Governor Stephen Poloz still predicts for the housing market conjures up thoughts of powdery snow and fluffy pillows.
No bumps. No bruises.
But the threat of something more painful is growing.
Alberta’s real estate market appears to be in the early stages of a correction as the falling price of crude ripples through the province’s economy. Many homeowners are rushing to sell while they can, buyers are increasingly scarce, and prices are faltering.
The worry is that Alberta’s problem will infect the rest of the country as the weakened economy destabilizes a real estate market that is overvalued by as much as 30 per cent.
Mr. Poloz has acknowledged that stretched household finances are a big reason he cut the bank’s key lending rate last month. Economic modelling by the Bank of Canada indicated that, without lower rates, the falling price of crude would hit households hard, pushing the closely watched debt-to-disposable income ratio up four percentage points to a new high of nearly 167 per cent.
It may be hard for Canadians to imagine what a housing correction looks like, let alone a crash. House values have been on a steady upward trajectory in most of the country since the mid-1990s, swelling the wealth and borrowing power of Canadians.
Crashes are ugly. They are not soft.
On one block of palm-tree-lined Ramona Street in Miramar, Fla., an outer suburb of Miami, nine out of 37 homes were in some stage of foreclosure in early 2008. Boarded-up houses and for-sale signs were everywhere in this neighbourhood of 1960-vintage bungalows.
When the dust settled, prices across the United States had fallen more than 30 per cent.
A U.S.-style crash here is unlikely. The U.S. real estate market fell hard and fast because communities like Miramar became all too common – places where home buyers quickly found themselves owing more on their mortgages than their homes were worth. As prices tumbled, more than 30 per cent of U.S. homeowners with a mortgage would eventually wind up underwater – a problem fuelled by excessive leverage, tax breaks on mortgage interest and lax lending standards. And because bankruptcy laws in many U.S. states prevented banks from seizing homeowners’ other assets, many people simply walked away from their mortgages and their properties, sticking lenders with millions of foreclosed properties.
The Canadian market is different in a number of important ways. Very few Canadians are at risk of going underwater on their mortgages because they generally have more of their own money invested. On average, Canadians have 74 per cent equity in their homes, and for those with mortgages, it’s 49 per cent, according to a November, 2014, report by the Canadian Association of Accredited Mortgage Professionals. Three per cent of homeowners have less than 10 per cent equity, and 1 per cent are underwater.
Those ratios, of course, are dependent on prevailing prices, which are almost certainly inflated. But Canadians are clearly more insulated from a market downturn. That is not to say a serious correction isn’t possible.
The main risk in Canada is not a sudden decline in house prices. It is household finances. Falling incomes or higher interest rates would put a significant share of homeowners in distress. In some cities, a retreat of foreign investors in Canadian real estate could also take some of the froth out of the market.
Lower borrowing rates in the short-term may just put off the inevitable, perpetuating an unsustainable mix of less saving and more borrowing, argued Merrill Lynch economist Emanuella Enenajor. She worries the Bank of Canada will cut rates again in March, setting up the economy for “slower growth once the adrenalin shot fades.”
The housing market is headed for a “narrow” regional shock – an 8-per-cent annual price drop in Alberta, but higher prices in Ontario and Quebec, she said.
In the end, the housing correction in Canada could look more like a bumper car ride than a crash. With incomes stagnant, it could take years for homeowners to work off their debts, and for buyers to afford homes at today’s inflated prices.
The landing may be soft, but far from comfortable.
This all just started within the last 3 months. If the price of oil remains low, what's instore for the province at the end of 2015? And let's not forget the incredible amount of debt people have... when things get tough there's absolutely no cushion.
Last edited by Kitlope; 02-02-2015 at 07:42 AM.
So this November ill be finished my 5th year on my Mortgage. What sort of general advice would you guys give to a guy going into re-negotiate his mortgage?
FREE THE LOOPING .GIF MEMES
Do not be loyal to a financial institution #1. At least enquire what a broker can offer.
I personally would go 5 year fix; not entirely sure rates,but could guarantee u could get under 3% which I would be happy with( wholesale lenders can offer great rates but heloc's can get tight and sticky) rumour is that come summer we may see rates breaking 2.5% (under) come spring/ early summer(
Also some major institutions only give 90 day holds on rates mostly, I was shopping at one point when rates bottomed 6 months in advance I luckily had a great specialist that was able to roll back the clock an extra 60 days because I was " on the books" lol so really doesn't hurt to get a hold on a rate in July/ August as u shop around.
Just some of the latest news...
Calgary's real estate market sinks, but Toronto's big spenders out in force
CAROLYN IRELAND, The Globe and Mail, Feb. 05 2015
"Prof. Andrew, who is director of the executive seminars on corporate and investment real estate at Queen’s, thinks the impact is partly psychological. As long as commodity prices have been robust and interest rates low, consumers have felt more confident in the strength of house prices, he surmises.
He worries that a downturn in Calgary could still spread to Vancouver, Toronto and other richly valued markets."
Calgary’s housing market slumps as oil’s fall takes a toll
TAMSIN MCMAHON, The Globe and Mail, Feb. 02 2015
"Only a month after predicting that home prices in the region would be stable in 2015, the Calgary Real Estate Board admitted..."
"The region’s deteriorating housing market has yet to hit prices, the board said. Among detached homes and townhouses, prices were flat compared to a month earlier, but up an average of 7.7 per cent compared to January, 2014, ..."
Variable mortgage you could get 2.25%.
I would personally go with a variable mortgage since I don't see interest rates going up 0.75%+ anytime soon at least not for the next couple of years. I don't think it's a big gamble either way.
Last edited by Meo; 05-02-2015 at 09:45 AM. Reason: Grammar
Can anybody provide me with historical reports such as this:
The problem I have is the EREB only provides reports that go back 5 years, but I'm looking for 2006, 2007, 2008, 2009 stats on listings, sales, prices, etc. I can find prices, but not listings or sales.
Just some links to current opinions...
Calgary area housing starts plunge in January
by MARIO TONEGUZZI, CALGARY HERALD, Feb 9, 2015
CMHC forecasting house price growth in Calgary
by MARIO TONEGUZZI, CALGARY HERALD, Feb 6, 2015
The economist realtors love to hate: David Madani stands by 2011 prediction of Canadian housing ‘day of reckoning’
Garry Marr, Feb 5, 2015
When it comes to house prices and house sales real estate people usually are way overly optimistic in their predictions. They like to think they are economists but usually they are way off the mark.
"The man who does not read has no advantage over the man who cannot read." –Mark Twain
Anyway, most of the time it doesn't really matter to most people who's right within a few percent one way or another. Such differences tend to only really matter to those that are "all in" if not more so via debt/leverage/mortgages/etc., where the little differences add up, even compound, into huge differences (gains or losses) over time.
What bothers me is that the are "all in" in housing, includes a lot of young families putting everything, years of savings, even parent's savings, plus committing decades of future income towards a purchase. Even here, much of the time this works out ok for these people.
It's the turning points (price changes, job losses, coinciding problems, etc.) where people get into trouble and lose all those years and years of effort and savings in a short time as a result of being too optimistic at the wrong time. (It risks totally damaging their families as well.) Worse, many don't even think a turning point is possible so they go "all in". They'll agree that no one can predict the future but through their own choices and actions, they nonetheless essentially make a huge bet on the future. They are also often encouraged to do so by the many vested interests from agents, media, politicians and even family and friends. Other homeowners also fuel the belief in ever rising house prices for their own self serving goals.
Last edited by KC; 09-02-2015 at 01:02 PM.
I have a friend who did just this and now he's in foreclosure. I even warned him 5 years ago when he bought the place that he was taking way to big of a gamble, since the house was half a million. Guess who he's blaming now that the day of reckoning is nigh?It's the turning points (price changes, job losses, coinciding problems, etc.) where people get into trouble and lose all those years and years of effort and savings in a short time as a result of being too optimistic at the wrong time. (It risks totally damaging their families as well.) Worse, many don't even think a turning point is possible so they go "all in". They'll agree that no one can predict the future but through their own choices and actions, they nonetheless essentially make a huge bet on the future. They are also often encouraged to do so by the many vested interests from agents, media, politicians and even family and friends. Other homeowners also fuel the belief in ever rising house prices for their own self serving goals.
Everybody but himself. I'd be lying if I didn't say it has affected our friendship.
Usually house buying is an investment but it takes years to get to that point. Real Estate agents live for the moment. They will make claims to get a house sold. This is an up and coming area, the house down the street sold at, we have people looking for houses in this area, there is another offer on the house etc. They have a play book that they work from. They go to courses on how to wrap up the sale. To them it's about the commission. To the people buying in some cases it's their life savings. I don't hate real estate agents but some of their tactics are questionable.
"The man who does not read has no advantage over the man who cannot read." –Mark Twain
Well, I guess we'll see over the next year how prices move.
Panic' setting in as Alberta, Saskatchewan
REUTERS, FEB 17, 2015
"...with one analyst saying seller panic has set in.
"What is interesting to note about the housing measures is that there is a clear sense of panic," Mazen Issa, senior Canada macro strategist at TD Securities,..."
CMHC’s revised forecast brighter than expected 2
BY MYKE THOMAS, CALGARY SUN, FEB 14, 2015
"Canada Mortgage and Housing Corp. (CMHC) has revised its 2015/2016 Calgary housing market forecast and it is likely more optimistic than expected by most."
Last edited by KC; 17-02-2015 at 02:50 PM.
A couple interesting comments here about the US market... plus an older new article with Shiller's views on Canada.
Shiller: Home prices right level based on history
Wednesday, 18 Feb 2015 | 8:32 AM ET
Discussing the downtrend in housing starts, and the current uptick in housing prices, Yale University Professor Robert Shiller, co-founder of Case-Shiller Index.
Canada heading into a slow-motion version of the U.S. housing bust: Robert Shiller
Mamta Badkar, Business Insider, Sep 21, 2012
"Robert Shiller, the economist who famously predicted the U.S. housing bubble, has told CBC News’ Neil Macdonald, “I worry that what is happening in Canada is kind of a slow-motion version of what happened in the U.S.”
Macdonald writes that Shiller and other economists are most worried about household debt, which has ballooned from 75% of household income in 1990, to 150% today.
And most of this debt is held by the most “vulnerable households—defined as those devoting 40 percent or more of household income to paying interest charges.”
While these debt levels are said to be about the same level of U.S. household debt around the time of its bubble, Shiller does clarify that..."
We're building infill this year and will start to talk rates in a few months. A broker might help, sites like ratehub show the best rates in your area too. I've found my bank has come pretty darn close each time, I've asked for free banking and such to get a better deal.
I could see Edmonton prices dropping a bit, depending on what oil does. Maybe down 5% y/y to next year, then flat, then back up slowly.
But Calgary could see some bigger drops, particularly in the mature areas. Some of the pricing is ridiculous. million for a semi detached 2000 sq ft. and they're everywhere. Lots of corporate bonuses disappearing, plus a few head office jobs here and there.
Hmm Vacant Land prices tumbled in 2008 by close to 50%. We are still down that much from then. So many people are still dumping land for 30% of its worth in 2008. Im honestly surprised the Edm Real Estate market has not crashed. Im pretty sure its 100% due to growth pressure. And once that pressure stops we will have a major correction.
"If you did not want much, there was plenty." Harper Lee
Mainly outside the city. In 2008 you could not buy an acreage for less then 100k. Now there are quite a few selling for 40k. And with inflation I have noticed that land is still not as valued as it was. On any greenfield site. (outside the immediate development zone)
Maybe its mainly due to speculators not having the cash reserves anymore due to the changes the banks made to lending for vacant land. Of course the big development companies have cash and assets to protect them from that particular phenomenon. But a lot of smaller companies are still noticing it. Im not saying its a particularly bad thing tho.
I want a $40000 acre rage where are these?
Haha if you really want one my company does have one for sale. (2ish acres in Keephills, Alberta, beutiful area)
other then that there are other ones here.
I did go up to 52k sorry. im sure there are many many more like these in other areas as well.
"If you did not want much, there was plenty." Harper Lee
half of them aren't even acreages. One of them is only 0.2acres. Our lot in Holyrood is bigger than that.
Luck is the collision that occurs when preparation and opportunity run into each other.
You got a good sized lot then.. 8750 sqft is a big lot, City Of Edmonton Bylaws you can put a 2800sqft main floor not including the garage.
And its not 100km away from Edmonton, every single one of those is 1 hour or less away.. Hell even further on the Yellowhead is still under 1 hour away. Nobleea asked for 1 hour away so i gave that.
And yes. it is indictictitive. (because most of those are NOT recreational), want recreational? http://lakearnault.com (still under 1 hour)
Wait, wait. We went from "land is worth 50% of what it was in 2008, in some cases 30%" to "hey look! I found some absolutely terrible pieces of land in the boondocks for under 50k!"? Is that really how far the goalposts were moved?
From Blue Ridge, AB
To Edmonton, AB
1 h 46 min (162.0 km) via AB-43 S and Yellowhead Hwy E
1 h 54 min (163.4 km) via AB-43 S and AB-37 E
Last edited by kcantor; 20-02-2015 at 04:45 PM.
"If you did not want much, there was plenty." Harper Lee
Still looking for these acreages that are 30% 2008 levels.......
^ May be an error. It doesn't really matter anyway unless you find such opportunities and actually take advantage of them.
Housing has to be one of the most competitive markets in existence. I'd guess that most of the time you get what you pay for excepting where the macro trends create booms and busts where sometimes but very rarely pricing gets out of whack for a time.
Blue Ridge is about 15 minutes from Whitecourt on hiway 43.
Hardly a decent daily commute. It's a pretty bland area, on a flat plain north of the hiway between Whitcourt and Mayerthorpe close to the Athabasca River.
There is a large sawmill close by to the town, so I'm guessing noise from there would be a bit of an irritant.
I've also never really liked the drive on Hiway 43 in the area since it gets a lot of freezing rain in the winter off of the ridge of hills just to the west.
Hardly a good comparison to any property within a reasonable daily roundtrip from Edmonton.
Interesting perspective and spin regarding the Calgary market in the article below. I think it's very much the same as investing talk you'll hear regarding equities. Basically, you can't lose if you stick with it. That's mostly right but markets need to be viewed from both a macro, averaged, indexed, generalized perspective and also from a micro, individual, specific, timing perspective.
The long-run macro perspective almost always looks good and most people experience decent results. It's where people gloss over the micro/individual results, the failures, the bad timing, the hardship is where I find such promoters to be highly unethical.
Realtors take long-term view, see real estate as 'strong investment'
Mario Toneguzzi, Calgary Herald, February 23, 2015
I expanded a few of the comments that come with this article. No one is unnerved among those folks.
Ahh i see your problem.
The MLS System thinks old Entwistle (1 km east of Entwistle) is blue ridge alberta. (look at the location tab on the relator.ca link) OR MLS really has no idfea where Blue Ridge Alberta is, and thinks it is in Old Entwistle and i was wrong because i was following their map.
hmm i always thought Spin2 did selling prices. However some people don't tell land titles, or have other instruments.
Hmm that Meso West one for 40k.. unfortunately was an Estate. but its value (as per Spin2 in 2009) was 98,000 "092 186 470 09/06/2009 TRANSFER OF LAND $98,000 ESTATE"
so close to 40%.
So yes there are examples. (I have come to hate Realator.ca's Location system. Near Impossible to find the direct land that they are talking about)
Just sold my house for $368,000. Bought it for $330,000 in 2012. Was asking for 379,000 on it. It's not a sellers market right now, that's for sure.
Just glad to sell it though, for personal reasons and some money will be made on it, so that's good.