Analysing the Calgary Market

[JRL]

Hi Everyone,

Let me preface this message by saying that I can`t wait to become a REIN Member, cash is tight right now as I`m one of the lucky people in possession of a vacant condo that I`m trying to sell.

Just curious as to what everyone`s thoughts are with respect to when the Calgary market will swing again and start to heat up. I personally know a handful of people who are waiting on the sidelines right now because of "articles in the newspaper" (ugh) which suggest a continuing downward trend. I don`t understand it, as the lights will never all be green, and there hasn`t really been a time like this to be a buyer in quite a while.

One problem is the banks, who, even with falling overnight lending rates, haven`t really come down on their 5-year fixed term mortgage rates. Obviously, they`re cautious after what`s happened in the U.S., and you could even argue that they`re trying to recoup some of those losses through a bigger margin on their interest rate spread today.

Thomas Beyer made an interesting post the other week about how AB will get an influx of workers from Vancouver in 2010, once the many capital projects for the Olympics have been complete. Hard to argue, as this is clearly where the jobs are. This is also clearly where the long-term economic fundamentals are. However, the average individual is nothing close to a sophisticated investor, and the reality is that newspaper headlines are a huge market driver, whether real estate or stock markets. Another month of a 30% drop in sales and 30% increase in listings year-over-year surely won`t do good for consumer confidence.

So - all that being said - when do people think the Calgary market will rebound, what will drive it, and what can we expect over the shorter-term period?

 

[UTCVenturesLtd]

QUOTE (JRL @ May 8 2008, 10:44 AM) Hi Everyone,

Let me preface this message by saying that I can`t wait to become a REIN Member, cash is tight right now as I`m one of the lucky people in possession of a vacant condo that I`m trying to sell.

Just curious as to what everyone`s thoughts are with respect to when the Calgary market will swing again and start to heat up. I personally know a handful of people who are waiting on the sidelines right now because of "articles in the newspaper" (ugh) which suggest a continuing downward trend. I don`t understand it, as the lights will never all be green, and there hasn`t really been a time like this to be a buyer in quite a while.

One problem is the banks, who, even with falling overnight lending rates, haven`t really come down on their 5-year fixed term mortgage rates. Obviously, they`re cautious after what`s happened in the U.S., and you could even argue that they`re trying to recoup some of those losses through a bigger margin on their interest rate spread today.

Thomas Beyer made an interesting post the other week about how AB will get an influx of workers from Vancouver in 2010, once the many capital projects for the Olympics have been complete. Hard to argue, as this is clearly where the jobs are. This is also clearly where the long-term economic fundamentals are. However, the average individual is nothing close to a sophisticated investor, and the reality is that newspaper headlines are a huge market driver, whether real estate or stock markets. Another month of a 30% drop in sales and 30% increase in listings year-over-year surely won`t do good for consumer confidence.

So - all that being said - when do people think the Calgary market will rebound, what will drive it, and what can we expect over the shorter-term period?

As soon as the media says things are good! The media controls the population and I think the powers that be, controls the media. What seems to work is to do the opposite of what the media says. A contrarian approach! The potential buyers that i know of are sitting in the sidelines waiting... Also look for stable prices and in migration to rise. I see new home prices on something that peaked out in the low $400Ks now selling for around $50K off! 10% on a $500K home and a higher % on lower prices. The sky is not falling as the fundamentals are there so this is a normal pullback which is just like looking at a stock chart... It regroups and can continue the trend line up. Buyers like condos and this seems to be the year of the condo.

 

[LeighF]

I`m wondering if their is a saturation with condos and whether we should consentrate on single family dwellings. Like you said UTC Ventures, do the opposite of what everyone else is doing????

Any thoughts?

 

[JRL]

I`m wondering if their is a saturation with condos and whether we should consentrate on single family dwellings.

Tell ya what - there are a lot of condo buildings in development downtown. It is a little concerning in terms of saturation, for sure. I guess the other side to that is that there are also a lot of massive commercial developments in progress downtown, and it`s already a ridiculous percentage of the population that`s funneled into the downtown core every day for work.

This means, you`d think, that there will also be more restaurants, bars, maybe theatres, whatever, to be integrated into the core. I`d love to see the city focus more on developing a more vibrant downtown, as, relative to Vancouver`s anyway, it`s crap.

People are probably also focusing on condos because as much as they`d like to buy that 500K house, the banks probably won`t let them. Something like 78% of the condos purchased last month were in the 200K - 349K range, with half of that being in the 200 - 299 strata. I`d guess that the lending institutions have something to do with that.