Crash in Calgary Market?

[Charly]

Question:

I am considering relocating to another Province. I own my house in Calgary (Inner City). Would it be best to rent the place out for the next few years or sell now. I ask as I am getting conflicting information about the Calgary market. yes, I know the prices have gone down but I was talking to a gentleman (who is an economist). He feels I should sell asap as the prices are going to continue to drop even further. He does not feel that even next year or after that will be better. So his advise is sell now if you can as you will loose much more in the future.


I took the Quickstart course in June but I did not get that impression. Yes, the market was expected to slow this year, then stabilize next two years. Maybe I heard wrong here. Sorry but can someone give me the straight goods here as to what Don Campbell said.

I do not want to do a panic sell but the way I heard it from this guy, Calgary is are going to drop like a rock. Something to do with the correlation with the drop in drillbit sales or something like that.

Your thoughts would be very welcome

 

[nepoez]

What is the description of the property, and how much would you sell it for?

QUOTE (Charly @ Jul 31 2008, 08:43 PM) Question:

I am considering relocating to another Province. I own my house in Calgary (Inner City). Would it be best to rent the place out for the next few years or sell now. I ask as I am getting conflicting information about the Calgary market. yes, I know the prices have gone down but I was talking to a gentleman (who is an economist). He feels I should sell asap as the prices are going to continue to drop even further. He does not feel that even next year or after that will be better. So his advise is sell now if you can as you will loose much more in the future.


I took the Quickstart course in June but I did not get that impression. Yes, the market was expected to slow this year, then stabilize next two years. Maybe I heard wrong here. Sorry but can someone give me the straight goods here as to what Don Campbell said.

I do not want to do a panic sell but the way I heard it from this guy, Calgary is are going to drop like a rock. Something to do with the correlation with the drop in drillbit sales or something like that.

Your thoughts would be very welcome

 

[TommyK]

How much equity do you have from this property? If you have sufficient equity, would you be able to refinance it and purchase yourself another property in a different province? If the property still can cash-flow (after refinancing), then it doesn`t hurt to keep the property. Then you will have two properties in different provinces. That way you don`t have all the eggs in one basket (what a mutual fund salesperson would say.. LOL)

If I were you, I would look at how much equity I have, and how much I am looking to purchase in a different province. Perhaps treat this as a porfolio by holding two properties (or more).

Another question is: what makes you think that your new purchase is going to grow in a different province? Have you done some studies on the other province? What if the other market drops more than Calgary does?

Again, this has to take into account how much you need the money in the near future. Your personal life situation can be a big determinant.

Hope this helps. Just a different perspective.


QUOTE (Charly @ Jul 31 2008, 08:43 PM) Question:

I am considering relocating to another Province. I own my house in Calgary (Inner City). Would it be best to rent the place out for the next few years or sell now. I ask as I am getting conflicting information about the Calgary market. yes, I know the prices have gone down but I was talking to a gentleman (who is an economist). He feels I should sell asap as the prices are going to continue to drop even further. He does not feel that even next year or after that will be better. So his advise is sell now if you can as you will loose much more in the future.


I took the Quickstart course in June but I did not get that impression. Yes, the market was expected to slow this year, then stabilize next two years. Maybe I heard wrong here. Sorry but can someone give me the straight goods here as to what Don Campbell said.

I do not want to do a panic sell but the way I heard it from this guy, Calgary is are going to drop like a rock. Something to do with the correlation with the drop in drillbit sales or something like that.

Your thoughts would be very welcome

 

[RedlineBrett]

What kind of economist is he? Did he provide any research or data to support his claim that prices will drop? It is very easy for people to talk and give their opinions but if he is not a real estate economist and does not have any facts or figures to give to you then all he`s got is hot air.The idea that drill bit sales are somehow a tell-all metric for Calgary real estate prices is completely asinine.
Here is a doom and gloom article about drilling.. and all it says is that NG prices are down now but were unexpectedly robust in the spring. Says drilling is going to come down next year but cites labor and material costs as the reason, not demand.

http://calsun.canoe.ca/Business/2008/07/26/6271626-sun.html

But if you are going to look at the bad you also have to look at the good

http://www.canada.com/edmontonjournal/news...ca-bc284698d73f

Do you think that Shell, one of the worlds biggest energy companies, would spend all this money on an acquisition if they thought that prices and demand for NG were going to drop (which, I would venture is the #1 reason drilling slows as some wells become uneconomic)?

I recently made this post in the members only section but I will paste it here. It has more relevance to the original topic which concerned over-supply issues with all the new condo projects coming on stream. This is how I feel about the outlook of our market, perhaps it will help ease your mind.

--------

Somewhat disappointed that this topic didn`t get better traction.

Anyways, here is my `take`.

While the new condos coming to market do show signs of new supply they are dwarfed by the construction and infrastructure projects. Have a look at this link:

http://www.calgaryeconomicdevelopment.com/..._18_2007(2).pdf

of $23B in expansion only $2.5B is earmarked for residential use and that number is a combination of commercial/retail/residential.

These numbers, combined with this next link have me pumping as much money into fundamentally sound real estate as I can.

Take note, this is a TRUE what`s behind the curtain moment... look at the headline then READ the article. This is what Don is getting at when he says it`s all about optics!

Doom and Gloom Headline: "Calgary`s hiring outlook lags behind expectations"

http://www.canada.com/calgaryherald/news/s...44-5944b802819a

Now, when you read the article you get a different story.

"Despite having the tightest labour market of any city in Canada, and so far this year, relatively low job creation, Calgary continues to vastly outperform plans for hiring at the national level and generally in western Canada, says the survey, to be released today. Analysts suggest that a lack of enough suitable candidates is forcing employers to temper their hiring plans."

Brett`s take - Too many jobs but same story as last few years (not enough qualified candidates) so no new positions being created.

and

"The firms expecting to hire and those anticipating layoffs produce a net employment outlook of 26 per cent, which is among the highest of Canadian cities, but below the 35 per cent recorded in Calgary a year ago for the third quarter of 2007."

Brett`s take - we are still kicking butt bigtime but when you compare this year to the crazy years of `06 and part of `07 it isn`t going to look as good, and this year over year drop helps newspapers sell more product.

one more

"Many employers have throttled back on their hiring plans, Upright said, in response to a lack of qualified candidates and generally, a very limited pool of available individuals"

Brett`s take - this means that we have the demand but not the talent to fill it, which is a GREAT problem to have if you are in the real estate business!

Final note: I think people aren`t moving here as quickly because given the recent escalation in housing and rents we aren`t as affordable as we were a couple of years ago. Wages cannot rise as fast as property prices. Who here has ever had their wage doubled over two years? With all of the infrastructure growth in the pipe wages will come up fast, but not ridiculously so. We will see another boom cycle, but I don`t think it will be as nuts as the last one and probably won`t really get going until 2009 when the BC Olympics projects start to wind up and the labor pool moves east to fill demand here.

 

[Charly]

QUOTE (TommyK @ Jul 31 2008, 11:29 PM) How much equity do you have from this property? If you have sufficient equity, would you be able to refinance it and purchase yourself another property in a different province? If the property still can cash-flow (after refinancing), then it doesn`t hurt to keep the property. Then you will have two properties in different provinces. That way you don`t have all the eggs in one basket (what a mutual fund salesperson would say.. LOL)

If I were you, I would look at how much equity I have, and how much I am looking to purchase in a different province. Perhaps treat this as a porfolio by holding two properties (or more).

Another question is: what makes you think that your new purchase is going to grow in a different province? Have you done some studies on the other province? What if the other market drops more than Calgary does?

Again, this has to take into account how much you need the money in the near future. Your personal life situation can be a big determinant.

Hope this helps. Just a different perspective.


Thanks Tommy K and neotz:

My house is a 1200 sq foot, 1.5 story, 2 bed, (potential 3rd bed) 2 bath house. It is a very solid home structurally and is walk in condition. The house was professionally renovated with kitchen, family room upgrades/additions and professionaly landscaped garden). The house is more like a quaint English cottage. It has a detached single car garage (oversized) . Excellent public transportation access and amentities close by.
I am analysing the pricing in the neighbourhood now.

I am moving simply for livelihood reasons. The house I purchase would be cheaper then my present home.
I love the house but again, question if I should sell now or rent when the time comes. Are you saying Calgary housing will be fine for a least the next year or two?

 

[invst4profit]

Do you want to start as a long distance landlord. Many would not but many on here have no problem.
Can you trust a management company will do a good job in taking care of your property.
Is this house of any sentimental value to you or are you OK with strangers doing what they will with it.
Is there any positive cash flow in renting it out.
If you approach it from a business prospective (investor not speculator) the answers should make your direction apparent based on the fact that you have joined REIN to invest in real estate.

 

[TommyK]

Hi,

Did you get a chance to read Brett`s posting?

The market has come down a bit since last summer in Calgary. If you sell now, you will realize a lesser gain comparing to last year. If you bought your place years ago, you should have a nice equity built up anyway. So ask yourself. Are you comfortable selling less and move on? Or would you rather rent it out to create some cash flow? But before doing this, you need to look at the "numbers" and "management" perspective.

Again, I don`t know how much you purchased this house, and if you are willing to provide some numbers, perhaps you can get a clear picture of the situation.

What`s the market value of the place?

Tommy

QUOTE (Charly @ Aug 1 2008, 07:38 AM) Thanks Tommy K and neotz:

My house is a 1200 sq foot, 1.5 story, 2 bed, (potential 3rd bed) 2 bath house. It is a very solid home structurally and is walk in condition. The house was professionally renovated with kitchen, family room upgrades/additions and professionaly landscaped garden). The house is more like a quaint English cottage. It has a detached single car garage (oversized) . Excellent public transportation access and amentities close by.
I am analysing the pricing in the neighbourhood now.

I am moving simply for livelihood reasons. The house I purchase would be cheaper then my present home.
I love the house but again, question if I should sell now or rent when the time comes. Are you saying Calgary housing will be fine for a least the next year or two?

 

[DonCampbell]

The other questions to consider are:

What financial goals do you have?

Is investment real estate a part of your long term picture?

If you were not moving for lifestyle, would the property make a good long term investment that creates positive cash flow?

Any market that moved upwards so quickly HAD to have a built in correction and take a solid breath (markets always do!) and that breath combined with the fear that the US media is spreading (thus slowing down people`s decision processes) always hits the strongest markets hardest.

I recommend you take out your Quickstart property analyzer form and follow the due diligence process as if you were going to buy it. This way it takes the emotions out of the decision and makes it a simple financial transaction.

We all should read this article from the Calgary Sun as well:

Be Careful To What You Compare - Prices Plummet?


Trust that helps!

Great posts in this thread. Great to see so many looking at facts, analyzing the positives and negatives and deciding from there.

 

[gwasser]

Do I know what next year`s real estate prices are? Do we live in a bubble? Are we going to crash? Those are phrases of the speculator. If you look long term, there is lots of promise for Alberta. In fact, if you are a bubble specialist, then you may have noticed that no matter where you look, all head lines are grim. I do not see a lot of optimism, blind nor reasoned, around. No `exuburance` to find here. Even the oil patch is gloomy, despite high prices. Although I would`t mind blaming it all on Stelmach`s royalty review, I think that such a blame would not reflect reality.

No, we are far off from a bubble. It feels much more like we`re in the middle of a bear market. People thinking the end of the world is near. What we`re looking at is nothing more than pure pessimistic psychology or better psychosis. Neither Canadian nor US statistics show we are in recession and if we are, it must be a very mild recession. Pundits are now shouting that the numbers are wrong because it sure as hell feels like a recession. So what do you make of that?

Stick with the fundamentals, look behind the curtains and you`ll see there is a lot of sunshine behind the clouds. Would I sell my house in Calgary and move to another province? Depends on my private and my career plans. Would I sell because the economist at the bus stop tells me so? No way.

So since you decided to move, you have to consider the following questions:
Is my current house suitable for rent? You just renovated and you seem kind of fond of the place. How would you feel if a bad renter trashes the place? Would you say, "Well a new paint job will take care of that?" Or would you say: "Oh, my carefully designed customized colore scheme has been ruined and years of loving polishing have been undone?" Well you know the drift of my questions.

Are you going to return to Calgary and would you like to live in your current property?

What are the economic conditions of the Calgary Rental Market - will forecasted rental income, vacancy rates and maintenance costs result in positive cashflow and will there be a good profit when combining potential appreciation with positive cashflow?

Will it be worth my trouble to get a rental manager and to do the rental administration?

Will holding this property along with my other investments bring me closer to my `Belize`?

You will have to do then a similar analysis for the decision whether you wish to buy or rent in your new place of employment.

Finally, a lot depends on how you look at your primary residence. Do you see it as an investment or do you see it as part of your lifestyle. Guys like Robert Kiyosaki see your personal residence as a liability, something that is strictly consumption. Personally I disagree, i.e. a residence has an investment component AND a personal lifestyle component and it is for you to figure whether this property will be equally valuable to you as a pure investment. For the latter, you will just have to look at the hard numbers.

Hope this helps

 

[Thomas Beyer]

QUOTE (Charly @ Jul 31 2008, 09:43 PM) Question:

I am considering relocating to another Province. I own my house in Calgary (Inner City). Would it be best to rent the place out for the next few years or sell now.
Two thoughts come to mind:

1) Consider the effort of renting a house when you live elsewhere. Consider the potential damage tenants can do to your house.

Calgary will be flattish for a while .. then rise again as Alberta`s overall economy is excellent and people will move here as they do to almost all cities across W-Canada and if long term interest rates stay within the 5% to 6.5% range .. as they likely will given Canada`s overall excellent debt situation.

Forget the short term market .. sell if you feel you should sell because managing from afar is a pain to you .. if not .. rent it .. and in a few year it will be higher ..

2) Don`t treat you house as an investment. If it goes up in value: great .. but count on more normal inflation like upside of 3-5%/year on average with up and down wobbles for years and years ... It is a place to live. It is your home. Over time, when you pay the mortgage off you make money in it in ANY market ! Hence: buy the biggest home you can afford !