Hi Guys and Gals,
Over in the members section Thomas posted a linear regression that he did. Over the past 50 years Calgary has seen an appreciation rate of 5.94%. Extrapolating from the existing data would suggest that 6% is a reasonable expectation for appreciation in the next 50 years as well. Is using this past performance an accurate way to predict future economic trends?
I think we need to look at what was the driving force behind past appreciation before we can assume any future gains.
What was it that drove Calgary housing prices upward?
The usual suspects like a strong economy, inmigration, supply and demand, increasing household income, interest rates, etc. REIN does an excellent job of analyzing these fundamentals.
There are other things that have contributed to the price increases as well.
Over the past 50 years we have shifted from primarly single income households to dual income households. This shift has definately affected housing affordability, but how much of the 5.94% can we attribute to this trend. Unless we start practicing polygamy I would say that this trend can be taken out of future growth projections.
The introduction of new mortgage products such as longer amortization periods and high ratio mortgages increase housing affordability. The contribution that mortgage products can make to housing affordability is pretty much maxed out. If you look at amortization tables you will see that from 15 year to 30 year amortizations you see a significant reduction in the monthly payment as the period increases. After 30 years the monthly savings from a long amortization period pretty much flatlines. Increasing amortiztion periods will not increase affordability anymore.
I would like this post to stimulate a discuss on appreciation rates. I know the two factors I mentioned above have influenced past appreciation. To what extent? Are there new factors appearing on the horizon that might skew the appreciation curve?
Discuss.
Neil
Over in the members section Thomas posted a linear regression that he did. Over the past 50 years Calgary has seen an appreciation rate of 5.94%. Extrapolating from the existing data would suggest that 6% is a reasonable expectation for appreciation in the next 50 years as well. Is using this past performance an accurate way to predict future economic trends?
I think we need to look at what was the driving force behind past appreciation before we can assume any future gains.
What was it that drove Calgary housing prices upward?
The usual suspects like a strong economy, inmigration, supply and demand, increasing household income, interest rates, etc. REIN does an excellent job of analyzing these fundamentals.
There are other things that have contributed to the price increases as well.
Over the past 50 years we have shifted from primarly single income households to dual income households. This shift has definately affected housing affordability, but how much of the 5.94% can we attribute to this trend. Unless we start practicing polygamy I would say that this trend can be taken out of future growth projections.
The introduction of new mortgage products such as longer amortization periods and high ratio mortgages increase housing affordability. The contribution that mortgage products can make to housing affordability is pretty much maxed out. If you look at amortization tables you will see that from 15 year to 30 year amortizations you see a significant reduction in the monthly payment as the period increases. After 30 years the monthly savings from a long amortization period pretty much flatlines. Increasing amortiztion periods will not increase affordability anymore.
I would like this post to stimulate a discuss on appreciation rates. I know the two factors I mentioned above have influenced past appreciation. To what extent? Are there new factors appearing on the horizon that might skew the appreciation curve?
Discuss.
Neil
