It seems like capital of Canadian rich retiree is having trouble now. AB is not the only one in price decline/inventory up mode.

http://victoriaflippersintrouble.blogspot.com/

Nice link... Looking for same flippertrouble of Calgary and other part of country.

I HAD AMOST A YEAR OF HOME HUNTING AND I DROPPED IT ABOUT A MNTH AGO AS I FELT PRICES WERE ALREADY COMING DOWN.THE SLUMP WAS ALREADY VISIBLE IN MANY CITIES I VISITED AND SAW HOMES THERE. THERE ARE NO BUYERS EXCEPT SOME SMALL TIME REAL ESTATE INVESTORS WHO ALSO ARE BUYINGONLY LOCAL LOCATIONED PROPERTIES. I FEEL I NEXT 2-3 MONTHS PRICES WILL SEE A 30-405 DROP FR ALL GENERAL LOCATIONS. ONLY UPSCALE AND HIGHLY SOUGHT AFTER AREAS SHALL REMAIN UNAFFECTED.ITS ALWAYS BETTER TO WAIT AND BUY I A DYING MARKET.

Nice post atsz.

Location, Location and Location is only half truth while buying RE. Other half RE truth is Timing, Timing and Timing. RE is best investment if both parameters are in your side.

This is common advice, good advice and bad advice. But we can at least try to:

1. Buy near the bottom
2. Sell near the top

This means:

3. Don't buy in a falling market, especially if it looks like it's near the top at least for first time buyers. So never mind the "hold for couple of years" advice.

I lived in US, Vancouver and now in Calgary. I bought and sale (late 2005) in US at right time. Stick with traditional buying practice if you want peaceful life otherwise house slave is worst nightmare. I have seen tons of people who are paying 70% their earning to feed home. How can someone manage car, kids, daily expense, travel, food, clothes, gas and unexpected expense in remaining 30%-35% earning. Most of them are 3-4 paychecks away to loose everything and they put all their life time saving into down payment. 50-60% of them take out RRSP money also to feed house down payment. Couple of my colleague bought in 2007 as price can never go down as fundamental are strong in AB. Now some are not feeling happy with their decision when they see 5 houses on sale in their row with 40K less. But no body talk about basic fundamental that is practical affordability that can bring ownership. We are seeing that is coming down the line. Same thing is going to happen in oil business soon. $135.00 is not price but speculation that will going to kill tons of average people who invested in oil lately in last one year. As rich/smart people bring boom and make money. Then these rich people leave bubble for common man. This is the nature of capitalist economy. So atsz, it’s time to enjoy the show when price going down.

All (40 yrs mortrage/0 down/interest only loan/take out money from RRSP/lend money from parent or credit card) look good when you can sale and make $$ in short time as an investment vehicle when price dramatically going up (from 2000 to 2006).
I have seen couple of people in US/Canada who are living mortgage free just by flipping condos... But factor that made them mortgage free was timing, timing and location. If you have good timing you can sale any house at any location with good profit.

Quote:

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Originally posted by atsz

I HAD AMOST A YEAR OF HOME HUNTING AND I DROPPED IT ABOUT A MNTH AGO AS I FELT PRICES WERE ALREADY COMING DOWN.THE SLUMP WAS ALREADY VISIBLE IN MANY CITIES I VISITED AND SAW HOMES THERE. THERE ARE NO BUYERS EXCEPT SOME SMALL TIME REAL ESTATE INVESTORS WHO ALSO ARE BUYINGONLY LOCAL LOCATIONED PROPERTIES. I FEEL I NEXT 2-3 MONTHS PRICES WILL SEE A 30-405 DROP FR ALL GENERAL LOCATIONS. ONLY UPSCALE AND HIGHLY SOUGHT AFTER AREAS SHALL REMAIN UNAFFECTED.ITS ALWAYS BETTER TO WAIT AND BUY I A DYING MARKET.

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Vimal Patel, Realtor
Homelife Royalcorp Real Estate Inc., Brokerage
Cell: 416-887-3745
Office: 905-856-6611
Fax: 905-856-6232
vimal.patel@gmail.com
http://www.vimalpatel.ca" rel="nofollow">LINK

Thanks Vimpatel.

Here is a test case 1.

A family of 3-4 needs at least 3 bedrooms, 2bath and 2 car parking.

Starting House Price: 400k
20% down payment: 80K (consider you keep some money for rainy days too)

Loan amount: 320K
Interest rate: 6%

Monthly payment: $2150
Monthly community fee: $150
Maintenance fee: $50
Tax: $150

Total: $2500

Let say family pay 40% of their expense to housing. Then total monthly salary in-hand: $6000/month

That brings annual family income including all taxes/RRSP: 125K

How many buyers family (or first time buyer) make $125k with 80K down payment?
If not then price will go down 30% in couple of years. We already seen 10% price reduction in last 7-8 months.

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Test Case 2
Let's say a person were to finance a 300k mortgage over 40 years @ 5% with no down payment (60% of new home buyers opt for the "new - 2006" 40 yr mortgages)

Monthly payment = $1446.59 - pmt(5%/12,40*12,30000)
Property tax @ 0.5% assessment = $125 / month
Condo Fees / Monthly upkeep = $300 / month
Total cost of owning a place = $1872 / month

That's pretty affordable right? But what happens when your house value drops by 10%? How long will it take to recover that 10% in equity (30k) by making these monthly payments?

TEN YEARS!!! It will take 10 years of these payments to build up only 10% of equity that a person may have lost on a 40 yr mortgage. 10 years to "save" 30k only to have it erroded by market conditions.

What do you think will happen when the interest rates go up, and 60% of first time home buyers on a 40 yr mortgage renew in 5 years and realize that they owe more on their house than what they could potentially sell it for?"


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http://www.canada.com/calgaryherald/news/calgarybusiness/story.html?id=e431f9fe-c09a-452d-9158-6685bf18748f

As of Wednesday, the CREB was reporting the average sale price for a single-family home in the city for the past 30 days was $471,768 while the median price was $409,000 -- down from May, when the average was $479,564 and the median was $419,000.
The most recent sale prices also pale in comparison to this month a year ago -- in June 2007, single-family homes in the city averaged $496,890 on the MLS market and the median price was $439,000.

Housing boom has come to an end: report
http://www.canada.com/calgaryherald/news/story.html?id=d3688355-3eef-42fc-8fb3-e38bc30e9317

Quote:

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Originally posted by vimpatel

Quote:

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Originally posted by atsz

I HAD AMOST A YEAR OF HOME HUNTING AND I DROPPED IT ABOUT A MNTH AGO AS I FELT PRICES WERE ALREADY COMING DOWN.THE SLUMP WAS ALREADY VISIBLE IN MANY CITIES I VISITED AND SAW HOMES THERE. THERE ARE NO BUYERS EXCEPT SOME SMALL TIME REAL ESTATE INVESTORS WHO ALSO ARE BUYINGONLY LOCAL LOCATIONED PROPERTIES. I FEEL I NEXT 2-3 MONTHS PRICES WILL SEE A 30-405 DROP FR ALL GENERAL LOCATIONS. ONLY UPSCALE AND HIGHLY SOUGHT AFTER AREAS SHALL REMAIN UNAFFECTED.ITS ALWAYS BETTER TO WAIT AND BUY I A DYING MARKET.

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Which cities are you looking at buying a home? You're predicting a 30-40% drop in home prices?

So for example say a $350,000 home in Toronto/GTA will drop 35% making it a $122,500 price reduction. So you are saying that home will sell for $227,500???? You are in for a big disappointment if you think this will hold true (and let me know if you do find a price drop like this...I will buy it for myself!)

I agree with Rahul about the 40 year amortized mortgages. I don't recommend them. You just end up paying a ton more in interest in the long run. Also don't live paycheck to paycheck funding your entire income towards a mortgage payment. If you can afford to buy and have a solid amount for a downpayment just make sure you have a solid "rainy day" fund to fall back on as well. It's common sense really...don't live beyond your means.

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These days it's not easy to trust experts, banks, govt., Real Estate Board, CHMC, NAR or anyone:

"It is difficult to get a man to understand something when his salary depends upon his not understanding it" - Upton Sinclair

We always see these conmments in media:

1. Housing never goes down.
2. It’s crashing elsewhere, but it’s different in this country because of blah, blah, blah…
3. Looks like we’re in for a minor correction, but it’s healthy, part of the cycle. Just a hiccup, nothing to fear.
4. Well, prices are down overall, but all RE is local and this city is different!
5. Well, the city is taking a dive, but THIS neighbourhood is different. It’s desirable. A fortress. Prices will always keep going up here.
6. Ok, the neighbour’s house sold for 20% less than it was purchased for, but MY house is different. It’s special, and I’m not budging.
7. I know I got screwed and can not manage short term. But I am looking for long term.

Well, we’re only at step 4, but there’s a ways to go yet.
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Calgary:June in summary

SFH sales down 18% YOY

Condos down 30% YOY

SFH median prices down 7% YOY

Condo median prices down 7% YOY

Pay a realtot to get out and you've lost 14% (commission+%age lost in price down) once commissions are counted, plus the discount you'll need to give to sell your property....so maybe a 20% haircut since the purchase of your "investment" in June 2007......heh.

That is roughly a $100k haircut in one year.

http://www.greaterfool.ca/

........................................................
Canada is not immune from this contagion. For a year I’ve been warning the policies of the federal government would exacerbate this situation, and it’s happened. Ottawa has continued to milk stressed-out middle-class families, refusing to cut income taxes. Government spending’s been out of control, and we’re perilously close once again to deficit. Over 400,000 manufacturing jobs have been erased, some because of the hollowing-out of national industry, others because Ottawa helped talk up the dollar and smash our competitiveness. The income trust decision wiped out much-needed private savings and nuked too much investment in oil and gas. And, of course, the government paved the way for 40-year mortgages which have coaxed so many young couples into buying too much house with too much debt.

But don’t just take my word for it. The pattern is always the same. First, sales volumes drop for resales homes, and months later prices start to tumble. Right now, as has been pointed out on this blog, Calgary and Edmonton are in the price-decline stage, with the average home in the Albertan capital down 11% over the past year, or a whopping $44,000.

In Toronto and Vancouver, sales are falling off a cliff, which likely means prices will deteriorate by the end of the year. Home sales in the GTA are down 18% over this time last year, and crashed 9% last month alone. In Vancouver, despite the hype of the 2010 Olympics, the situation is even more dire. Sales have crumbed by 43% in a year, and the number of people trying to bail has grown steadily, with listings up 18%............................................