Calgary real estate market

[Patrick.1980]

It says the median price of a house in Calgary is 400K and that someone making $57,000 a year could afford to buy that. I highly doubt that.

Interesting article about home affordability. Calgary is affordable compared to places like Toronto, Vancouver and San Fran, etc... but think the stats are misleading.

Calgary Is Officially The Most Affordable Major Housing Market In North America

Calgary named the most affordable major housing market in Canada and the U.S. by Zoocasa.

www.narcity.com

 

[zagox]

Interesting article about home affordability. Calgary is affordable compared to places like Toronto, Vancouver and San Fran, etc... but think the stats are misleading.

Calgary Is Officially The Most Affordable Major Housing Market In North America

Calgary named the most affordable major housing market in Canada and the U.S. by Zoocasa.

www.narcity.com

What is misleading about the stats? Calgary has high incomes and moderate housing prices (especially at 0.75 CAD).

 

[Silence&Motion]

The fact that Oklahoma City is the second most affordable city and San Francisco is the least affordable makes me think that affordability may be at odds with other measures of quality in cities.

It's interesting that most of the "affordable" cities (that is, the cities where actual incomes exceed the income required for home ownership) are affordable mostly because housing is really, really cheap (OKC's average home is $145,000!!). The two exceptions are Calgary and Ottawa, where housing costs are more in line with the unaffordable cities. It's just that Calgary and Ottawa have higher incomes.

 

[Surrealplaces]

I think they are off on the affordability calculations. They say the median price in Calgary is $400K which is probably correct, but they say someone only needs an income of $57K to afford it. It doesn't say how much down payment etc... but can someone really get a mortgage for a house at that price when they make $57K. annually? If they can, great, but I kinda doubt it.

What is misleading about the stats? Calgary has high incomes and moderate housing prices (especially at 0.75 CAD).

 

[Surrealplaces]

It looks like the prices are in USD, but still OKC and some others are pretty cheap compared to Calgary.

The fact that Oklahoma City is the second most affordable city and San Francisco is the least affordable makes me think that affordability may be at odds with other measures of quality in cities.

It's interesting that most of the "affordable" cities (that is, the cities where actual incomes exceed the income required for home ownership) are affordable mostly because housing is really, really cheap (OKC's average home is $145,000!!). The two exceptions are Calgary and Ottawa, where housing costs are more in line with the unaffordable cities. It's just that Calgary and Ottawa have higher incomes.

 

[Rollerstud98]

I think they are off on the affordability calculations. They say the median price in Calgary is $400K which is probably correct, but they say someone only needs an income of $57K to afford it. It doesn't say how much down payment etc... but can someone really get a mortgage for a house at that price when they make $57K. annually? If they can, great, but I kinda doubt it.

No, I was getting a new mortgage last year and at having made something like $62,000 the year before and online for over $70k in 2018 I was only qualified for a $350,000 house. With no other debt.

 

[darwink]

Yeah Calgary is super affordable. It’s all relative perceptions though, as we adapt our consumption very fast to our incomes. In Calgary our consumption takes very different tacks depending on what you want, people here have trailers, or go on multiple fly away vacations a year, or have expensive other hobbies, or buy fancier cars, or all of the above. In the boom years you could have it all - trying to maintain it with only 75% of the household income is a huge strain, but that doesn’t mean people are worse off here than elsewhere, we are just worse off compared to our previous selves.

There is a reason Calgary can still fill brand new rental apartments at $1600 a month.

 

[Patrick.1980]

Yes, and no. Using only averages, it is affordable compared to most, the issue is for people who work minimum wage or work for a national chain where wages don't vary much across the board. To your point, for the most part it is rather easy to purchase a home in Calgary given wages are still high for the most part.

Yeah Calgary is super affordable. It’s all relative perceptions though, as we adapt our consumption very fast to our incomes. In Calgary our consumption takes very different tacks depending on what you want, people here have trailers, or go on multiple fly away vacations a year, or have expensive other hobbies, or buy fancier cars, or all of the above. In the boom years you could have it all - trying to maintain it with only 75% of the household income is a huge strain, but that doesn’t mean people are worse off here than elsewhere, we are just worse off compared to our previous selves.

There is a reason Calgary can still fill brand new rental apartments at $1600 a month.

 

[gsunnyg]

Its nice seeing all these proposals going on but I doubt we'll see them all materialize in the next 2 years. Practically every developer is switching over to rental, thats bound to have an affect on rental vacancies when they all come online at once. Plus if theres a federal government change this fall and mortgage stress rules are reversed, we may see a rise in condo demand once again. Still this would be so hype if it goes through along with the other proposals throughout the beltline/downtown area! Yeah for more density?

 

[darwink]

Its nice seeing all these proposals going on but I doubt we'll see them all materialize in the next 2 years. Practically every developer is switching over to rental, thats bound to have an affect on rental vacancies when they all come online at once. Plus if theres a federal government change this fall and mortgage stress rules are reversed, we may see a rise in condo demand once again. Still this would be so hype if it goes through along with the other proposals throughout the beltline/downtown area! Yeah for more density?

Reversing the mortgage rules would be a big mistake. Injecting more risk into the economy doesn't make sense, especially since the government has already bailed out the mortgage market once in the last decade (by buying the insured mortgage portfolios of the banks through the Insured Mortgage Purchase Program (around $69 billion), and then CMHC extending its bulk insurance on uninsured mortgages directly to the banks (growing from $103 billion to $243 billion in 4 years). That bail out super charged the property market, and created more risk for the government.

A true price crash would rip through the federal government's balance sheets like nothing we have ever seen. Reversing the stress test would both increase the liability in growing the number of insured mortgages, and it would increase the risk across the existing portfolio.

 

[gsunnyg]

Reversing the mortgage rules would be a big mistake. Injecting more risk into the economy doesn't make sense, especially since the government has already bailed out the mortgage market once in the last decade (by buying the insured mortgage portfolios of the banks through the Insured Mortgage Purchase Program (around $69 billion), and then CMHC extending its bulk insurance on uninsured mortgages directly to the banks (growing from $103 billion to $243 billion in 4 years). That bail out super charged the property market, and created more risk for the government.

A true price crash would rip through the federal government's balance sheets like nothing we have ever seen. Reversing the stress test would both increase the liability in growing the number of insured mortgages, and it would increase the risk across the existing portfolio.

I have a few uncles in the mortgage and real estate industry and when I talk with them the problem really wasn't Calgarys market at all, it was Vancouver and Toronto. What really started spooking the Feds and BofC was that people were taking loans from their friends and relatives to put a down payment on a home that they could not afford. Now that isn't much of a problem if the home you're buying is $400k but if you're living in Vancouver and its $900k, well you can start seeing the risk of defaulting on a loan. More specifically had interest rates continued going up, they wouldn't be able to afford their payments in areas where home prices had accelerated. Now whats happening is that the housing market has essentially stalled in a number of cities like Vancouver because people are not qualifying anymore for large loans. In turn, home buyers are now lending from private lenders which are offering loans at even higher lending rates, practically subprime crap. This in turn also carries risks in the long run. Calgary, as clarified by many economists and local politicians was not at risk of a housing crash. Our homes prices are realistic and wages are high. There are countless articles advocating for the removal of the stress test or at least making it local, it had no business being in cities like Calgary, Edmonton, Winnipeg etc. The sooner the test gone for us the better. One glove does not fit everyone in this case.

 

[zagox]

I have a few uncles in the mortgage and real estate industry and when I talk with them the problem really wasn't Calgarys market at all, it was Vancouver and Toronto. What really started spooking the Feds and BofC was that people were taking loans from their friends and relatives to put a down payment on a home that they could not afford. Now that isn't much of a problem if the home you're buying is $400k but if you're living in Vancouver and its $900k, well you can start seeing the risk of defaulting on a loan. More specifically had interest rates continued going up, they wouldn't be able to afford their payments in areas where home prices had accelerated. Now whats happening is that the housing market has essentially stalled in a number of cities like Vancouver because people are not qualifying anymore for large loans. In turn, home buyers are now lending from private lenders which are offering loans at even higher lending rates, practically subprime crap. This in turn also carries risks in the long run. Calgary, as clarified by many economists and local politicians was not at risk of a housing crash. Our homes prices are realistic and wages are high. There are countless articles advocating for the removal of the stress test or at least making it local, it had no business being in cities like Calgary, Edmonton, Winnipeg etc. The sooner the test gone for us the better. One glove does not fit everyone in this case.

Seems reasonable to me that government should discourage mortgage lending to buyers that can’t afford a realistic range of future interest rates, regardless of city. If that means pension funds building more rentals instead of marginally qualified buyers taking interest rate risk on condos in Calgary, so be it. If we need a bit more counter cyclical stimulus from construction, let’s build more public infrastructure rather than risking the national banking system in the future.

 

[gsunnyg]

Seems reasonable to me that government should discourage mortgage lending to buyers that can’t afford a realistic range of future interest rates, regardless of city. If that means pension funds building more rentals instead of marginally qualified buyers taking interest rate risk on condos in Calgary, so be it. If we need a bit more counter cyclical stimulus from construction, let’s build more public infrastructure rather than risking the national banking system in the future.

Im going to have to disagree with that. We're talking about qualifying for mortgages twice the size required in Calgary for Vancouver and Toronto. The data consistently showed that Calgarys market was no where near heating in 2017. More recently, economists and housing experts have started giving the Bank of Canada heat for not bringing in these rules when interest rates were being slashed downwards towards record lows as it doesn't make sense now when we're headed towards neutral interests rates between 2.5%-3.5% . Ive read quite extensively on the stress rules since they were implemented as I'm doing my realtors licence on the side and have yet to find any reasonable argument as to why they were implemented federally instead of locally, instead you'll find more criticism than favourable reviews. We have politicians from city hall to the provincial legislature building advocating to drop the rules as they have done extensive damage to our local housing market. I fully support keeping the rules but locally based on market conditions rather than federally.

 

[Rollerstud98]

I was able to get my house due to 2 other deals falling apart from financing. The house I bought was on the market for a total of 5 weeks I think with 30 of those days being under contract lol. This was a house listed under $370,000.00. I got it for under $360,000.00. I payed more than I was pre approved for but I also got a $5/hr raise between those times. These last 2 months while I was in school were right but now back to work with my apprenticeship complete and life is good/easy again!

 

[gsunnyg]

If the mortgages here are half the amount, isn’t the income required to qualify also half the amount? The rule is “customized” to the local context in that way.

What exactly is the “extensive damage” they have done? Purchase prices are down a couple percent year on year in Calgary, and rental rates are up a few percent. That’s good for buyers, bad for sellers, good for landlords, bad for renters, but the impacts to all those groups are fairly marginal in Calgary relative to much larger economic challenges from low oil prices.

The main “extensive damage” has been to sales volumes, which is very bad for real estate agents and home builders, but the history of setting national banking policy based on their interests does not have a good history (see 2008).

Income isn't the only thing that plays a role. There are many other measures to mortgage stress rules including length of employment and employment history. The core of the rules are based around seeing if you can afford payments at ridiculously higher interest rates. As far as the damage goes, its a hinderance to home ownership. Clearly scoping out all the forums we can see projects being put on hold, falling through, or being converted into rental. This has affects on employment related to construction and development outside of just realtors and mortgage brokers. If you go back and look at the housing data by CREB, we were recording very healthy housing sales numbers post the oil crash thanks to lower interest rates. Now even that one bright segment has been hit. I personally know many friends and family holding back from buying a home due to the stress test, they simply aren't qualifying for the same size mortgage. I don't think a goal of a policy should be to deter people from home ownership. Again, I have yet to find any reasonable source or justification for these rules outside of the Vancouver and Toronto area not to mention how horribly constructed the rules are. For example, now they're considering taking home equity into account in case of situations where home owners may default. Sometimes when there isn't a problem you create one trying to fix it. That seems to be situation here in Alberta. Our soon to be premier has already stated he would fight for the removal of the stress test in Alberta and I think in terms of development, the sooner the better. Calgarys housing market is far from imploding. Just think of the folks who bought a home in Vancouver for $800k when overnight rates were under 1% by borrowing money from their friends and families for a downpayment, they will most likely get boned years from now when interest rates begin to rise even higher.