Bob Truman, First Place Realty

LOL Bob.  Great intro.  I'm sure a little more leisure time would do a lot of us some good.  I predict we will hit $398K for SFH median by the end of August or even sooner.  Time could certainly prove me wrong, but I don't think it would be a risky bet at this point.    

News flash:  Mario at the Herald is wrong.  Housing in Calgary is stil $200K above what it should be.

As a buyer I am thinking of lowballing a couple properties.  Offer $200K for a shack worth $380K according to market value.  But I may wait cause my downpayment is $20K cause making $100K/year I still have to pay $2000 on a rental so it takes a while to get a downpayment.

They just lowered interest rates.  Things should get really nasty when interest rates must come up, whenever that is.

Calgary shacks are still overpriced.  Since 2004.  Nothing to see here, move on!

Calgary Real estate is overpriced shit shacks.  :)

You're sounding a lot more positive these days. Any chance that you'll be running for mayor? You'd make a great ambassador for Calgary. -Bob

P.S. There are 28 single family homes listed on MLS for less than $200,000. What are you waiting for?

Oldtimer realtors tell me the Calgary real estate market always goes sour in July so it's time to go fishin on June 15

calgary rip off:

apparently your the sucker, 2k for rent? my mortgage is only 1200 looks like i am banking 800 bucks a month and also building equity.

Then again i have the wierd idea that maybe i buy a smaller home first and save for a larger nicer located home after i have aquired sufficient saving for it.

It's funny how everyone thinks if they have a decent paying job they should be able to afford a large dwelling with no planning or saving.

It's not an instant gratification world out there and the people that live like it is are in for a big shock when they interest rates rise. And the ironic thing is that those renting are going to feel that pain also. seriously 2k a month and you say how buying a house is a rip.

Seriously true Jeff!  Calgary-rip-off is getting RIPPED-off in Calgary.  $2000/mo in rent and he makes $100,000/yr income.  There are a few questions:

1. Why do you need to pay $2000 in rent?  You must like the digs you are in to pay that much.  Rent something cheaper and save up more quicker (either for a house or to invest)

2. Do you think you'll be taken seriously when you lowball 200k for a 380k listed house?  Nobody will even give you the time of day.

3. While you wait for all your predictions to come true regarding interest rates rises and falls, you're paying $2000 a month to a very happy landlord.  Haven't you been waiting for 5+ years?  Yikes.

4.  If calgary sucks so much why are you working here?  Oh right, it's probably because you make $100k a year here.  So you wanna make Calgary money and not pay Calgary prices.  Gotcha.

Any way you slice it.  You can keep waiting and waiting.  The world will pass you by.

Jeff - how long have you lived in your house? Where is it?

If you'd have to buy it today, what would a 5/25 mortgage look like?

You can hardly argue that either of you has a good/bad deal without looking at where you are located, and how long you've been there.

Regardless of what Jeff has for a property, it is virtually certain that Calgary Rip Off is being ripped off. 2000 per month is ridiculous even if it includes utilities. It's no wonder they can only afford a sub-200k property. It's a wonder they can afford anything...

There are a lot of renters out there saving up for a property and they are probably making a good bet given the huge inventory of sale properties. Rip Off is not one of them.

More likely it's a troll story though.

The median price becomes less an indicator of what you think you'll get for your house as the data sample gets smaller (ie less houses are actually sold.)

You could have a median price of 500k, but if only 10 houses sold that month, and all were purchased for 750, what does that number really mean?

Don't be surprised to see that median/average number actually go up, and if it does, it's not necessarily good news for home sellers. You need to factor in volume as well.

If they were all purchased for 750K, the median price would be 750K. I understand what you're trying to say, that when the volume goes down the numbers could become a little skewed. (Or is there a different way of calculating the median price if you're from Winnipeg? LOL) -Bob

Wow, there are SIX months of inventory out there and climbing.  It looks like we are going back to steep declines in prices again.

Jimmy - I am seeing a ton of properties for rent for the 1800-2000 mark.  Mind you, these are modern/renovated homes and bungalows in communities that are very close to down town. I'm currently looking to lease, and most of the properties I'm looking at are actually on the MLS. One that I am particularly interested in is listed for 550k. The rent is 1800/month. My mortgage payment would be around 3000. I don't necessarily think that's a bad price at all.

From what I see on kijiji, rentfaster, etc - you don't get anything exciting in the 1400-1600 range in a non-suburb community. Am I missing something?

Will I agree that there are 2k rental properties out there. My point is if you are paying that much you should think about another place to rent. For someone who is saving to buy a house on 100k income it will take a very long time to get a downpayment saved at that level. There are lots of properties in the "near burbs" that are less than 2k - they might not have granite countertops...

Keep in mind a large amount of your mortgage is equity. All the rent money is down the drain. In order to have 2000 down the drain money in a mortgage as interest you would need to put zero down on your 550k house at these interest rates. I guess if you did that, you could then rent your house to Calgary Rip Off to help pay for it though ;)

Will the only thing your missing is home ownership!

"If they were all purchased for 750K, the median price would be 750K. I understand what you're trying to say, that when the volume goes down the numbers could become a little skewed. (Or is there a different way of calculating the median price if you're from Winnipeg? LOL) -Bob"

I mean if they were FIRST purchased for 750k (say 5 years ago) and then sold for 500k, the median price would show up as 500k, but the real story there is the depreciation, not the median.

Winnipeg's housing market is still on fire. I sold my house in Calgary 3 months ago to take a job out here. (I lost mine in Calgary and am still trying to get back to Calgary but ... no jobs for what I do)

Right now I have 3 friends selling their houses in Calgary and none of them are moving. I listed my house in Rocky Ridge for 410 and sold for 405. Since then, two of my friends, who lived across the street from me, listed at 400. One sold for 365 (ouch), and the other is still on the market for 390, but realistically, probably he won't get much more than 380. Things have changed for the worse, at least in Rocky Ridge, in 3 months. I got lucky when I bought in 2005 and I got lucky when I sold in March.

I have another friend in copperfield who has listed his house because he simply can't afford the rise in interest rates. My real estate agent buddy is joking he's going to have to take a part time job soon :P

Not to be one of the doom n gloomers, but there was an article in the paper saying people had stopped moving to Calgary. Now with 'austerity' being the word of the month, economies around the world are slashing budgets big time. There is a chance here that the recovery is false, propped up only by artificial stimulus spending, and when the stimulus dries up, we're into a double dip recession. That means the price of oil is going to go down, and with it, Alberta's fortunes.

To add fuel to a Perfect Storm scenario, Calgary went completely ape shit building between 2005-2008, and now the vacancy rate is reflecting that. (I'm guessing all the people who wanted to flip condos got burned, now are just renting them out). This says nothing about potential interest rate hikes.

Low oil price = loss of jobs = desperate sellers + huge inventory = lower housing prices.

I think I agree with that CIBC report that says housing is 20% overvalued right now. I think a correction is likely, at least in Alberta, but who knows the future.

I agree with Radley.  If sellers want to move their properties, the new reality is that they will have to lower their prices.  It is amazing to me how people will make slight adjustment to their prices and follow the curve down over many months.  Instead of dropping $15K immediately they lower their price $5K per month for 6 months and end up losing $30K.  I'm sure it must drive Realtors nuts to watch clients make these minor adjustments while never increasing the competitive edge of the property.  In late 2007 my friend got a private cash offer for $340K, but decided he could get more and listed on MLS for $370K.  After 8 months of minor adjustments, he sold on MLS for $320K and walked away after commissions and closing costs with around $305K.  We are going to see a lot of people end up just like him.  Smart sellers will make quick, "dramatic" adjustments in order to beat the competition in this buyers' market.      

Jimmy - I guess it all depends on what you are looking for... I don't want granite counter tops, but I also don't want a 40 year old kitchen, linoleum floor, and blue carpets. If you're ok with 1700 rent, then you can have a good home in a good location. At 100k income that might not be clever, but with two earners in a family 1700 really isn't bad at all...

Just because I choose to rent, does not mean I want to live in an old crappy house.

A large amount of mortgage payments are equity, but not so much in the first few years. To go back to my example of the home listed for 550k, vs renting that same home for 1700, I think that in that case the whole equity thing kind of goes out the window when you look at the shorter term (i.e. 5 years). I can bank the $1300/month difference, for 5 years, so thats 78k in my pocket.  Granted, I would've also paid off 72k of the house in that period, but I did not have any property taxes, high insurance cost, or loss of value.

I'm not proposing renting is a good solution long-term, but in these times, even at seemingly high rents, it may not be bad...

I've owned a home before and didn't think home ownership was all that great but I think that in a normal economy it does make financial sense...

There have been some really good informative posts on here recently.  This is stuff I like to read rather than pure bashing....even the bashing of "Rip off" has logic arguments.

I agree exactly what is said about him renting. It's not the fact he is paying 2k/mth but more the fact that he is trying to save for a down payment and still paying 2k/mth.  If your goal is to save you should be willing to make sacrifices in the short term that will help you reach your goal as fast as possible.

Another good point made about statistical population and the accuracy of the data.  you can argue that the population size is causing the median to be skewed but another factor here would be the liquidity risk.  when you have low volumes it causes low liquidity and higher volatility in pricing.  you will tend to notice this in very small places because when somewhere gets desparate to sell the buyers just might not be there and vice versa.

Spence, I love your example of the people who adjust their prices too low.  I wonder how often Bob encounters this.  I think if the realtor is experienced enough, not only will he recognize this but he will communicate well enough to prevent this from happening too long.  I have seen this several times in many neighborhoods.

Bob, you have probably seen some inexperienced (or bad) realtors let this happen.  Do you think it's from lack of experience, scared of telling the selling or the realtor maybe being too busy to keep up with that client?

Some realtors will say anything to get the listing. More often, however, it's the seller who is unrealistic and they're the ones who set the price, regardless of any advice/statistics/facts they're given. -Bob

Happy Canada Day to all!

BTW Garth Turner is now fixated on his blog of spinning fear and exaggerating the downturn.

That boy is all doom & gloom.

Since he started writing books 11 years ago many of his predictions were total fantasy that never happened to this day... On his blog, he'll make an assessment only to change it soon after.

Too bad some folks take him literately. If he scares folks as a sales tactic for his books, why does he attacks realtors? He says realtors embellish facts or lie: he acts similarly, no?

Will:

Your idea of a 1700 rental is more reasonable but you make some assumptions that are questionable.

Tax and insurance adds up to 4-5k at most per year.

Over 5 years, it's very unlikely that a home would depreciate. Even if we had a 20% drop this year, homes would still be 40% more expensive than 5 years ago.

If you assume that your home appreciates at 2% per year over 5 years, which is below the long term average, you still can cover the overhead with lots of tax free gains to spare. The money you save/invest from rental "savings" would be taxed.

My point is that with fixed interest rates this low, it is much cheaper to buy. They are coming down and still have a long way to go if bond yields are any indication of what's coming. If the fixed rates came up to historical levels, it would be a different story entirely. Regardless of economic trends, the price of home ownership is dirt cheap and this is why prices are high.

I'm not exactly sure why Garth attacks realtors but often people do because they generalize the whole group.  It's really too bad because there are probably only 10% of them that are either really bad at what they do and/or use some very crooked or unethical techniques.  Unfortunately it only takes a few to make them all look bad.  This is true for anything and not just realtors.

After many years of being in the main stream media himself, as well as being an MP, he knows how to get attention. Nothing wrong with that. Any emotionally-healthy individual can read his blog and make up their own mind about things.

He likes to be controversial and it feeds right into the ignorance of a small portion of his followers. I know for a fact that Turner has a better opinion of most realtors than he lets on. He's corresponded with me in the past, off the record, about some blogging incidents, and I am pretty confident that he is just playing to the crowd. I'll give him full marks for being a master at marketing.

The irony of the situation, however, isn't lost on some of us. The real estate industry is simply doing their best to market themselves as well. Maybe somewhat misguided in my opinion, but it all boils down to getting attention and being credible.

Vinny is correct about every occupation having some bad apples. You could start a blog about crooked lawyers, incompetent doctors who cut off the wrong appendage, teachers who can't teach, shady accountants, and priests who abuse children. They're all out there. -Bob

Jimmy:

I agree with most of your comments... Your tax/insurance premiums are bang on. If I said anything else before than I retract that.

I think it's very likely that a home bought today will be worth less next year, and the year after precisely because those dirt cheap economics are disappearing. If I would purchase a 500k home today, and it's worth 400k next year, that's a hard spot to be in. For somebody starting from scratch, that's a big hit that will put you in a tough spot further down the road.

I understand your comparison to home prices 5 years ago, but the fact of the matter is that all we should look at is home prices today. After all, I did not buy a home 5 years ago, I am in the market today, so the only relevant price is today's price, and the expectation of future pricing.

If I put my rental savings in RRSP/TFSA's that have a reasonable return I either get taxes back (which I can then reinvest), or the gains are tax free, so I think the money can be put to good use.

When looking over a five year period, if my home drops in value 20%, it's 400k instead of 500k. That's a big hit! The way I look at it is that there's a far greater chance of home prices going down over the next year or two, than there's the chance of them going up. So renting for one or two years could result in a purchasing price of 100k less. Granted, my monthly payments may be the same due to higher interest rates so on a monthly basis I might not be any better off.

I would be better off when it comes time to sell the place though. I was in a position last year where I lost a lot of money on a home due to wrong buying/selling times, and renting now would seem to reduce the chance of that happening again.

I guess the bottom line is that I don't think there will be any appreciation over the next 12 months. If you look at it from that perspective, a 12 month rental period would not be so bad...

My guess for Jun 30 is 6026.

@Jimmy, here is a portion of a previous post of mine at findcalgary.com that I think is relevant to this discussion:

"Even if prices trend higher over time, if you purchase at the top of a bubble, it is many many years before you see a positive return. There have been enough speculative bubbles over history that you can look back at how prices recover if you desire. In some cases, like the Tulip Bulb Bubble (is that the first one – it’s the first one I can think of), you would have never seen a positive return if you purchased before the speculative bubble burst. If you’d purchased shares before the stock market crash in the 1920's before the great depression, it would have been in the 1970s before you would have made any money. I think you are still in the red if you had bought into the tech bubble. I don’t know if real estate was in a bubble here in Calgary (and I know everyone has an opinion, but arguing about a subject that is confusing to the foremost experts in the world is a bit of a waste of time), but if it was, and the bubble started to burst in 2007, it could legitimately take 5 to 10 years or longer before someone will see a positive return on their home."

I am also very bearish on the economy as a whole.  A huge portion of our economic recovery over the past year was based on the positive effects of real estate (just take a look at the contribution to GDP growth).  It is also hard to argue against the fact that at least over the short term prices are dropping and construction is slowing.  The result is that the single most important positive factor in the economic recovery is quickly becoming a drag on the economy.  

This has finally been realized in the bond and stock markets.  Bond yields have flattened drastically and long-term yields are crashing.  This is a sign that 1) we are entering a deflationary time and/or 2) the probability of a double-dip recession is high.  The stock market is also correcting because stocks are valued to assume earnings will return to previous levels next year but people are realizing that this is now unlikely.  

What does this mean for Calgary?  The Calgary economy trends very closely with the price of oil - and so do home prices.  Supply in the oil market is artificially high based on supply and demand.  It is being propped up by an anticipated increase in demand driven by the economic recovery.  As the likelihood of a V shaped recovery decreases and the consensus shifts to a U shaped recover or an L shaped recovery, the only consequence is for oil prices to start to fall.  I'm not saying "Crash" but I'm saying that if people are hoping that oil is going to save the Calgary economy over the next 2 or so years, they are probably mistaken.

This assumes government policy maintains the status quo.  Our governments have shown a willingness to make decisions that are horrible for the long-term to get a short-term gain.  I just don't know what bullet is left in the chamber for them to fire with worldwide debt ratios approaching critical levels.  I guess only time will tell.

I also continue to hear interest rate rise arguments but don't understand them.  Long-term interest rates are tied to bond yields and bond yields are dropping, so expect to see reductions in long-term interest rates over the short term, not increases.  With the economic outlooks for Canada and USA looking uncertain, it is also hard to imagine a quick return of variable rates to the historic mean.  I've said it before, but I have not heard a valid argument for why interest rates should be a motivating factor in a "buy now or wait at least 6 months" decision.

In regards to an early post about renting vs. buying, I agree that each individual's situation is different.  If someone has a large family with 3 or 4 kids and works downtown it might be very expensive to rent an adequate place for less than $2,000.  When I was younger it made sense to spend more on my house so I could live close enough to work to be able to walk, thereby not needing a car and saving quite a bit of money.  I agree that $2,000 sounds like a lot of money for someone trying to save for a house but I also think we should be hesitant to criticize without the full picture.

It's nice to see a lively blog.  Sorry about the long post, but hopefully it is worth the read or stimulates additional conversations.

Mabus

Great post Mabus, one statement jumps out at me...

"The Calgary economy trends very closely with the price of oil - and so do home prices."

I used to think this as well, but I've kind of come to dismiss it as a major (or even all that relevant) factor.  I mean, of course when the price of oil is high, more companies will be hiring, leading to higher salaries, improving the local economy, etc.  

But as we've seen, at least in my opinion, our housing bubble in Canada (and around the world) seemed to rely very little on fundamentals such as salaries.

It just seems like too much of a coincidence that  so many countries experienced a real estate bubble at the same time to place much weight on the price of oil.  

If anything, wouldn't it be the price of natural gas that played a more central role in Calgary's economy?  (Where most of Alberta's royaltys come from).

I remember last year Kevin over at EHB did an analysis on the correlation between the price of oil & natural gas, and home prices in Alberta.  It seems to me he didn't find it to be much of a factor.  

Just Googled it and found the two articles I was thinking of...

http://edmontonhousingbust.com/2009/03/oilberta/

http://edmontonhousingbust.com/2009/04/oilberta-redux/

Credit/debt expansion (magnified greatly with leverage) and good old-fashioned human bubble-mania psychology (higher prices can only lead to higher prices!)  seem to be the only common factors that unite the bubbled markets (popped or otherwise) around the globe or within Canada.

Oh and Happy Canada day to everyone tomorrow!  Sometimes it's easy to forget that we do indeed live in one of the greatest countries in the world, even if it is overvalued at the moment :)

Will-

My situation is as follows.

I bought our house in Feb 2007, moved in Sept.

My mortgage originally was 5/28 at a 5.3% rate. So I would guess if it resets now I will be paying less per month.(Also i was following both bob and the bubble blog at the time and people were very bearish on housing)

The TOWNHOUSE (100 condo fee) is located in the NE about 2 blocks from a c-train station and new school that should be complete next year. And it was located half a block from the "city center" in saddleridge.

The reason I bought here was it was the "best place" I could buy while I was getting the sufficient amount of saving for my "estate" house I want to buy in 5 or so years.

My ultimate goal is to find a medium sized house in a nice neighbourhood. However I realize that to buy that house with no saving would be to put myself in a precarious situation should interest rates rise or I or my wife loose our jobs.

So as for now I am sitting in my starter townhouse paying my mortgage and banking money in order to move up to the house I will eventually live in. I have a hedge for if house prices increase as my house should also increase. And I have a hedge if house prices decrease because I have lived in my house for 3 years and that's at least 50k of rent I saved.

My house has not appreciated much since I bought it but I never banked on it appreciating, if it increases it just puts me to my goal faster.

That being said i am planning on looking for my new place after all the facilities are built in my community as that should push the value of my home up compaired to the overall value of the housing market.

I do think that if I was still renting right now I would hesitate in buying a place, the glut in inventory does seem to indicate to me that prices will come down. But if your saving for a house then SAVE for a house don't bank on depreciation to give you the larger downpayment your looking for, which is what I see from most of the renters that will buy when the prices are lower crowd.

@Jimmy

"the price of home ownership is dirt cheap "

You're putting forward the same flawed logic that has roped in the highest proportion of homeowners on record.

The price of houses is the highest ever.  The cost of debt is at or near all time lows.  The price of home ownership for those that are leveraged will be steep, not cheap.

For fun:

July 1st 2010 listings 6275

October 1st 2010 listings 8000

SFH

5932

Mabus and Will I agree that in the short term, a buyer would be advised to wait, especially in Calgary.

Medium term (1-2 years out) I am more optimistic. Oil is stuck in a band where if it's just as unsustainable below 50-60 as it is over 150. The banks know this, which is why their oil estimates are all over 80 in the years to come.

ALE the price of home ownership is cheap. Ask anyone who had mortgages in the 80s or 90s. Interest rates are very low - fixed and variable. You just have to buy what you can afford and not pretend to have a champagne lifestyle on a beer budget.

@Jimmy

"ALE the price of home ownership is cheap."

The price is what you pay.  Again houses are not cheap the debt is.  And for those that think debt is the equivalent of equity and low interest rates equals cheap housing they will learn as folks did in the 80's that the price paid is too steep.

Jeff...

"My house has not appreciated much since I bought it but I never banked on it appreciating, if it increases it just puts me to my goal faster."

Not exactly, your move up house would appreciate even more in dollars.

I'm still holding Tulips.  The market will recover.  This is just a blip.

Tell me if this is wrong:

In GENERAL, if you already own a house that is say 100k.  Then you want to move to a house that is 300k eventually.  Isn't it BETTER in dollar terms if the market FALLS?  For instance if it falls 10%, you save 30k on the 300k house but only lose 10k on your initial house.  Thus, as long as you can finance it responsibly, you are better off if home prices are falling and you are in a "move up" situation.  You get more house for the money.  In a rising market you can't really "move up" as easily, since the larger home price would appreciate substantially more than your smaller home.  So don't panic and think you "lost" money.  Just like owning a stock in a company, there are ups and downs.

You are only in a losing situation if you over-extended yourself for your first home and you are barely making ends meet.  You really lose out when prices fall and you panic sell "locking in" your losses, then start paying to rent a place.  Eventually you know you'll have to re-buy into the market if you plan on staying in the city.  In the end, all the buying and selling and moving etc. will not be worth it.

Long term renters are losing out too, unless they find a real good deal for rental and bank/invest their savings.  But will you have that good deal on rent for 10-20+ years?!  My bet is no.  You will have to move again and again, uprooting yourself and your family.  If you are single-urban-and-cool-no-kids type, then OK, good for you that you love renting.  The question you need to ask yourself is "Do I plan on staying in this city long term?".  If the answer is yes, then buy when you NEED a home, and make sure you don't over-buy based on your projected earnings.

OVERALL, isn't it sort of an inevitable thing that property ownership is generally a good thing that we get to enjoy in Canada?  As long as you can afford your own place and eventually pay if off free and clear, you are LAUGHING.  Nobody can kick you out, because it's your home.  If you are happy living there it is FAR BETTER than paying rent your whole life.  Renting is more of a transitional time in all of our lives.  Settling down for good in ONE PLACE and deciding to rent until you are retire is just crazy.  But if you are into this, please tell me so I can have you as a renter for life.  Of course your rent will go up (and down only if you negotiate!) with inflation and the market.

Personally speaking, I would much rather see prices come down more despite the fact that I already own a few properties.  Some might say "ohhh but now those properties are worth less than they were in 2007!".  Well, my answer to that is "Have I sold them yet?  Do I need the money now?  Why would I sell properties that are almost 80% paid off?!".  When prices fall there are just more places to buy on the cheap!  Calgary is not going to be a ghost town in 20 years.

It's the dumb property investors that over-extend their financials who can't realize a good return on their properties.  These are the same guys that end up being "case studies" on many bubble bloggers sites.  The "flip this house" guys are idiots.  Just to let you know, SOMEONE is buying those guys' foreclosed property.  I'll bet it's not the bubble-bloggers but rather a smarter landlord who rents for a decent rate, treats his tenants well, doesn't overleverage the property, etc.  This same type of landlord will be miles ahead in 10-20 years.  Chances are, they aren't only invested in real estate, but also have other investments too just like life-time renters do.  In a way they are more diversified, since they hold real estate investments as well as stocks, bonds, etc.

If you think prices for homes in Calgary in 20 years will be LOWER than they are today... then your name is squidly.

Some random thoughts:

It's curious that so many people think a house is an investment. It can't be - beyond have a rent free place to live when you're older. An investment is something that increases in value beyond inflation, and houses don't, otherwise future generations wouldn't be able to afford them. (Unless we start subscribing to the European models where houses have to be handed down generation to generation because they're too expensive for anyone to afford by saving from scratch.)

If a house is an investment, that means I shouldn't have been able to afford my house as houses have existed in Calgary for what? 150 years? And if a house is an investment, nobody should be able to get a job, save up, and buy one after a century of increasing value beyond inflation. Yet it happens all the time. In the short term, houses fluctuate with value, but in the long term, they don't beat inflation. And if house prices enter bubble territory, their growth in value typically stagnates until inflation catches up again. We're in this stage now. House prices aren't going anywhere but down for a long ... long time, to catch up with the increases of 2005/2006.

I still think something is screwy with that median price number posted. I'm not saying it's not right, I'm saying its getting skewed to all hell. For the five years in Calgary, the value of my house followed the median exactly, dollar for dollar, as did the value of houses belonging to 2 other friends of mine. We just happened to own houses that were in that Calgary middle range.

I've been wanting to sell my house for a couple of years now, and whenever I would look at the comparables to come up with a list price, the price was right on with the median, almost dollar for dollar. Then something happened in December.

When I finally sold in March, it was for 15k under the median. Last week, my friend across the street finally sold for a whopping 55k under the median, and my other friend is yet to sell, and his price is dropping every week (so far his price is 35k under the median and counting).

This indicates to me that people are starting to sell 500-600k homes for much less than their historic value, artificially inflating the median. I think things are much worse out there than the numbers indicate. As I mentioned before, I have 3 friends now trying to sell, all 3 out of desperation (one can't afford his house anymore, the other 2 need to get out ASAP). I have a fourth friend who has to rent out his basement in order to make the payments. These are all married professionals with dual incomes.

No doubt.  Your first home should not be thought of as an investment.  It's more of a necessity to have some sort of shelter.  Whether you rent from a landlord or "rent" money from the banks...it's the same thing.  You are paying to have a roof over your head.  If you have more of a down payment, then you don't get bent-over by CMHC insurance too.  The main difference is the lifestyle between renting and owning.  Choose what you like, and be responsible about the money you have left over.  

However, there are some plots of land that are well located in up and coming areas, or just luck out (ie, vancouver coast line, mount royal in calgary, inner city communities that are undergoing infill development).  When you buy property solely because you think the location is going to get more popular, then YES in this case it would be right to consider it an investment.  There is a huge difference between some suburban cookie-cutter box vs. a RC2 lot in the inner city.  As long as you don't buy new, you'll reap the appreciation of the land that is capable of having TWO homes built on it.  And if you chose right, your residentially zoned place may be rezoned to commercial...then you've made even more money.  Kudos if it is your 2nd property that you bought as... an investment.  The house can be falling apart - it's the land that is key.  Try telling people who bought in Ramsey, Altadore, Varsity, Elboya, etc. that property cannot also be an investment.  They'll throw their numbers in your face.

Pragmatist: Would it surprise you to learn that Calgary homes in the year 2003 were worth less than homes in the year 1978 in inflation adjusted dollars?

It's curious that so many people think a house is an investment. It can't be - beyond have a rent free place to live when you're older.

I would argue that you have to think of your first house as an investment.  Your first house is likely going to make 25%-50% of your net worth by the time you retire.  It is going to be the biggest expenditure you have over the time you buy it until the time you pay it off.  And it is a highly leveraged investment, ie. small changes in prices result in large changes in your % equity.  

I think you have to look at your location, look at the relative prices, look at trends in inventory and sales, and look at where interest rates are headed.  In other words you have to view it as an investment decision and do the required due diligence.

Think of all the poor folks in the US who didn't regard their house purchase as an investment and got sucked into bad mortgages at the peak of the market.  While some of them were greedy investors who just made a bad investment decision, many others were just people buying a house to live in that either they couldn't afford or that they underestimated the downside risk of.  Many have lost massive amounts of money by doing so.

CM

Nice cherry pick by looking at 2003 and casting aside th 6 to 7 % annual rise since then

Median house prices are probably linked to income levels, and in many cases income tracks inflation. Since Calgary incomes started skyrocketing in the early 2000s it makes sense that prices followed. Even now wages are up over 6% inAlberta in the last 12 months. If peoples incomes rise 5 % per year you can't expect home prices to remain flat or below inflation.

Mr Winnipeg

The "median house" changes over time and what was median in a growing city 10 years ago might be rather upscale now. The opposite happens in a shrinking city. Also some areas ghettoize and would decline against the median

I believe a house needs to be considered an investment if you answer no to the following question:

Could I live here for the next 25 years?  

If the answer is yes, and even with drastic changes in interest rates you won't get priced out of your home, then it is probably safe to not think about it as an investment.  I think this was the case for most people that are from the generation before me.  There is no consideration of selling - possibly until after retirement or even death.

If your timeline of ownership is much shorter, you need to view your house as an investment, or you are not adequately managing your risk.

Mabus

Bear market in Alberta real estate 'til 2016. Property values to at minimum fall in half.

Other 'now to then' foresights:

* Oil ranges between $30-50

* Mostly zero to negative inflation

* Rates in western world (Canada included) begin long rise in 2011, not due to inflation, but due to gov't bond default risk (shift has already begun in PIIGS)

* Boomers try to save their retirement hopes by rushing the exits with their biggest 'asset' (by mid-decade they'll finally realize it was actually a  money-eating liability all along)

* TSX bottoms near 4500 in 2013 (next bull market begins 2015)

* by 2012 we technically & collectively realize we're in a depression (but certainly not as great as the Great Depression, more like the late 1800's depression)

Hey Prairie Oyster,

   Hopefully it does not get that bad.  I think a drop of 25% is totally in the works though.  Knock a cool $100K off of today's prices and we will be more in line with where we should be.  I'm sure many people would agree with you that avg prices could drop $200K (about 50%).  My uncle bought a house in Calgary in the early 80s.  He paid $110K for the place.  The person he bought it from had paid $180K for it a couple of years earlier.  That was closer to a 40% drop, but it does go to show that there have been major drops in the past.  I'm sticking with my 25% because I consider myself an optimist.

Here's a long-into-the-future(16 years) prediction for you:

http://www.chpc.biz/

he says the avg price in Calgary in 2036 will be $276,776.

Does this guy not have anything to do with his time?

I think the only thing that would produce big drops in prices would be unemployment. Which thankfully we have not seen in Alberta yet. Sure we have seen layoffs but nothing like the 80's. I do believe that the decline in sales is due to people being careful as the economy seems to be running like a old car in the winter.

I think we will continue to see prices soften for the rest of the year , but no panic selling . Also I truly believe Calgary is different and the call for energy in the world will continue and this will keep Alberta in a good position.

JS: I believe that the price support target on the 'Plunge-o-Meter' page is updated automatically using the 'deflation per month' variable.  This variable has changed dramatically since 2007.

When Calgary was experiencing $4k/month price drops in 2008 it had a price support date of 2011.  But with prices actually increasing during 2009 it dramatically lowered the pace of deflation.

Now that it's been 3 years since our peak, Calgary homes have only lost about $660/month in value, significantly less than the pace we were seeing in 2008.

Who knows where it's going to go in a month, much less a year. Tomorrow we could find out that Ghana has a corrupt central banker and, apparently, CIBC has nine billion shares in one of its managed banks and the world economy collapses.

Aint Globalization grand? Now I can lose my job because of corrupt politicians everywhere!? Weeeeeeeeeeeee

My 2 cents is that Calgary RE is simply at the mercy of the world economy. Will there be a double dip recession in the US? How will Europe hold out? Will China continue to grow at the torrid pace it has been on? I think you can pretty much line up Calgary RE with oil prices. There seems to be enough volatility that any scenario is likely, an optimistic one with mild growth in prices and a pessimistic one with prices dropping. I can't really see prices dropping more than about 5-10^ yoy myself though.

Given that I make MORE money than most of the people giving advice on here(I pay more for my rent than your mortgage which is laughable-you would likely be dead or homeless if you hadnt bought when you did), and my wage is GUARANTEED, I am thankful for all the free advice though, much of which is as pointless as a dump after a load of exlax.  It keeps going and going.

Keep in mind that buying a house is not like getting a loaf of bread.  I havent bought cause my down payment isnt quite big enough...yet.

Someone said life will pass me by.  Actually, I pass life by.  Everyday I am above ground and not cremated...its a bonus.  How do I know this?  Im the guy that you will likely see if you have a heart attack....seriously.  Im part of the lifesaving team.  You all should feel blessed that my brain is so big...bigger than Calgary!

So, coming from someone like me, Calgary real estate continues to be crap shacks...Mario Tonegucci and Marty Hope would be proud.  And I should have Duckett's job.

In the meantime I am a serf to a Lord, my landlord, and in an executive home the nicest Ive ever lived in, in my life.  Complete with basement and 50 watt Marshall Stack and heavy Olympic Barbell(for cleans and jerks and snatches).  Ill leave that with the musical illiterates here.

I can outshred you all and outthink you all.(fist bumps)

Calgary ripoff

That's pretty cool.  Well as they say, you don't want a doctor who isn't cocky  - especially if he's about to frickin cut into you and restart your heart or something.  So it's good that you sound like a cocky freak because maybe you have the goods to back that up.

Anyhow, yes you can get a mortgage even right now for less than you pay in rent.  They aren't homeless, they're just living in a ghetto, condo, or circa 1940's slanty shanty.

Your executive home for 2k a month is slowing you down in your endeavors to amass a large enough down payment so you won't get bitch-slapped by CMHC.  But we all gotta live somewhere, and we need to have a certain lifestyle that suits us.  To each their own.  I wonder if Marty or Mario even have more than 5% equity in their shacks?

I doubt you can out-think me "doctor".  We may be on the same level if indeed you are an FRCP.  I wonder if I've ran into you at work?

dont get hot Whoa, the fact is that RE is overpriced, period