# Is it time to buy a house in Calgary?



## wandering (Jul 5, 2014)

I currently rent a detached home for $1500. I'm wondering is it time to buy a home here or should we wait till prices fall further? What are the pros and cons?
Based on current rate of price decline, I'm pretty sure if we wait for 6 months to a year, we'll likely recoup a lot more than the rent that we pay out. 
Any thoughts contrary to this? Any reason why we should make the move sooner than later? Other than of course, things that impact our lifestyle(bigger space etc.).


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## Underworld (Aug 26, 2009)

I haven't really seen much of a move in house prices on realtor.ca.
Just something to keep in mind - we bought our house in the suburbs 8 years ago for 450,000 and its worth roughly 450,000 now. That's a crummy appreciation 

I guess flip side of that we've saved 230400 in rent  Houses around us rent for 2400 p/m.


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## CPA Candidate (Dec 15, 2013)

The Teranet National Bank house price index for Calgary is showing a declining trend since the middle of last year and considering the continuing job losses, it is surely going to get worse before it gets better.

After the 2007-09 crisis, it wasn't until mid 2013 that prices rebounded to the mid 2007 peak. If history repeats itself, prices could decline more and stay depressed for several years.

I'm of the opinion that Alberta is likely never returning to the prosperity previously obtained as the US oil production has changed the game permanently. I'm sure Calgary will get back on it's feet and get along well, but the streets are unlikely to be paved with gold again. I'd wait longer for opportunities to buy.


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## Zoombie (Jan 10, 2012)

For a counter-opinion:

Waiting for the rebound could create a scenario of high competition for listed houses which may make it harder to find your 'dream home' say in 6mo - 1yr. I think that there are a lot of people looking at posted ask prices, and saying "oh I'll wait 6 months for prices to drop". Once a rebound in oil prices begins to look steady, all of these buyers who have been waiting cash-in-hand will be plowing into the market (driving down time on market, and driving up prices). 

It could be prudent take advantage of the current lull in real estate business to take your time, find exactly what/where you want to buy and use the current environment to negotiate a price lower than the ask. There is no guarantee that prices will be lower later, and I would argue that it is better to pay $X dollars more for a house you love, than be hurried to close a deal in the middle of a market recovery. 

Arguably, it depends on the price range you are looking in as well. Apparently high-end homes have dropped materially in price, while more affordable homes have held up better.


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## gibor365 (Apr 1, 2011)

imho, If you can afford than buy.... timing-market is impossible.... My wife's relative waiting for 15 years when house's prices will go sharply down and .... still waiting... they spend around 300K on rent already and live in some small apartment...


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## peterk (May 16, 2010)

Zoombie said:


> For a counter-opinion:
> 
> Waiting for the rebound could create a scenario of high competition for listed houses which may make it harder to find your 'dream home' say in 6mo - 1yr. I think that there are a lot of people looking at posted ask prices, and saying "oh I'll wait 6 months for prices to drop". Once a rebound in oil prices begins to look steady, *all of these buyers *who have been waiting *cash-in-hand *will be plowing into the market (driving down time on market, and driving up prices).


Which buyers? Tens of thousands are getting laid off. Those of us with a good job are getting pay-cuts, and very few of the layoffs will ever be rehired. Most of the cuts are permanent employment reductions. Also a lot of the rich boomers who own 2-4 properties are starting to say "might as well retire now and move to BC, I ain't paying Notley's 15%"

I wouldn't be buying Alberta housing right now or probably for the next 5 years. Is there a way to short housing in Calgary? I'd like to do that!


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## nobleea (Oct 11, 2013)

Calgary will be hurting for the rest of 2016 as it's capital budgets that really dictate employment and those took a big hit and are unlikely to get re-evaluated until 2017. Oilcos are much more efficient than they were 1, 2, yrs ago and can be profitable at much lower prices. Calgary's high-falutin ways will be tempered, but I think AB will be fine overall on a longer time scale.

Buying in spring is not the best time if you want a deal. All signs point to a continuing decline, and deals will be more aggressive around Christmas as no one wants to move/buy around then. Almost all severances should be exhausted by then. You are likely not going to get any crazy deals sub 450K.


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## Feruk (Aug 15, 2012)

The official unemployment rate is just under 8%. However, this excludes consultants, which got hit the hardest in the patch. Actual rate is likely closer to double that. Lots of people going to be struggling. I suspect housing prices have remained artificially high as the $1MM+ houses sell and the owners buy into the $500K-$800K market. That can only go on for some time. 

I'm starting to look for a good bargain, but will be taking my time. No need to rush. I can afford to sit and submit lowball offers until one is accepted a lot longer than someone trying to sell.


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## Just a Guy (Mar 27, 2012)

Well, you should set a price you think is fair for the type of house you want to buy. Then, if or when the property comes on the market, you buy it.

There are always reasons for house prices to fluxuate. You can get good deals in booming markets, you can get bad deals in poor markets. There are reasons why people need to sell (divorce, death, job loss, moving, etc.) below market and there are reasons why people need to buy (moving, despirate and stupid, etc.) who pay too much.

Get your ducks in a row, set your parameters, and don't bother trying to second guess or time the market. If you think it's a fair price, be happy with that. A home is rarely a good investment to begin with, so that shouldn't be your primary reason for buying it. If you want an investment property, then you have to buy with a whole different set of parameters.


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## AltaRed (Jun 8, 2009)

Underworld said:


> I guess flip side of that we've saved 230400 in rent


Which of course is not true. In the meantime, you have paid out a ton in interest on any mortgage debt you have, lost the opportunity cost of the equity you did put in (alternatively not having put that money in the stock market and gotten market returns), paid property taxes and home insurance, et al. Ownership is a lifestyle choice, not an investment choice.


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## nobleea (Oct 11, 2013)

Feruk said:


> The official unemployment rate is just under 8%. However, this excludes consultants, which got hit the hardest in the patch. Actual rate is likely closer to double that. Lots of people going to be struggling. I suspect housing prices have remained artificially high as the $1MM+ houses sell and the owners buy into the $500K-$800K market. That can only go on for some time.


That suggests there's over 40,000 consultants in Calgary alone that got laid off. Assuming half of them got laid off, there's over 80K consultants just in Calgary?? I find that hard to believe.

I don't think anyone's buying the $1MM+ houses that you suggest people are selling.


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## AltaRed (Jun 8, 2009)

The number does seem very large. That said, there have been thousands of self-employed contractors/consultants working for firms throughoug AB that have been laid off. Some companies had high ratios of contractors/consultants in their work forces. Many of them live elsewhere, including BC's Okanagan valley, who used to commute. I'd suggest trying to identify the number is elusive at best. 

Clearly those high paying jobs are gone and their lifestyle could be in crisis. As I understand it, the higher priced houses are in deep trouble while rentals are generally doing just fine (note latest results from Boardwalk REIT). 50 shades of grey in between those two book ends.


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## Underworld (Aug 26, 2009)

@altared Dunno maybe I'm missing something or can only see it one way :\

Pay 2400 per month to someone to rent for 8 years. Quarter million dollars gone  #sadtrombone

OR

Pay 2400 (for a mortgage plus property tax plus insurance) and get 100k equity (assuming no house appreciation) to extract and use to buy a rental property. I prefer having 2 properties over none.

But yea I agree with one of the other comments - timing is a mugs game. I just dollar cost average and buy more.


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## james4beach (Nov 15, 2012)

I think renting is under-appreciated. One of the perceived benefits of home "ownership" is building up equity. But that's only because the mortgage rules force you to save money, which materializes as equity. A disciplined renter ends up in the same place if they don't waste their excess cashflow - and save it instead.

Renting has numerous other benefits, including mobility and the lack of a giant mortgage which effectively chains people down to jobs and lifestyles.

MMM has this nice article on Rent vs Buy. He also describes how great it is to live in the downtown of a vibrant city like Toronto or Calgary instead of fleeing to the suburbs to buy a big home.


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## peterk (May 16, 2010)

Why do you all say you can't time the housing market? Perhaps it's tricky during some periods in some locations? and everyone who has gotten burned by Toronto/Van that didn't buy over the last 10 years are upset because their timing didn't work out?

Alberta is a one trick pony that just got sent to the glue factory. Calgary housing prices haven't come down all that much yet. I don't think you can apply the efficient market hypothesis to the housing market like you can stocks, things move slowly.

I will eat my hat if Alberta housing prices are not lower in 1 year than they are today. I would love to short it if I could.


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## fraser (May 15, 2010)

prices in some sectors of Calgary RE have indeed come down. We have been looking for two years. We have stopped. TD and issued a report last month forecasting a five point drop for the remainder of the year. I suspect that this is a conservative estimate and will only apply to one sector of the market.

We decided to keep renting. In Dec 2014 we looked at a place that was listed for $629. It has been sitting on the market. Last time we looked, six weeks ago, it was $549. We looked at some new builds in late 2013 that were being snapped up at 800-825. One just sold for $660....after being reduced from to 689 from 739 a few months ago. 

The CREB stats are very misleading. Most properties are being re listed at a lower sale price hence the days on market numbers are completely misleading as are the actual price to list price ratios.


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## AltaRed (Jun 8, 2009)

I agree that RE Boards rarely show real life. Inherent conflict of interest.

@ Underworld, the debate on rent vs buy is for a different thread to avoid derailing this one. This subject has been debated before. I was mainly taking exception to your misleading comment about how much money was thrown out for rent..for nothing. To your point, that much money has also been spent on ownership, albeit for a $100k equity gain, and that is because it was forced savings per James, chipping away a bit of principal at a time. I am not against home ownership (I have usually owned as well). I am simply against gross misrepresentation of facts. Also, leverage is wonderful...when it works. So does a margin investment account.


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## Underworld (Aug 26, 2009)

@altared Thanks for the passive aggressive corrections! I'll take heed and learn how to use forums properly lol.


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## Feruk (Aug 15, 2012)

nobleea said:


> That suggests there's over 40,000 consultants in Calgary alone that got laid off. Assuming half of them got laid off, there's over 80K consultants just in Calgary?? I find that hard to believe.
> 
> I don't think anyone's buying the $1MM+ houses that you suggest people are selling.


Unfortunately, consultant job losses aren't really tracked. Standard practice in O&G is lay consultants off first. I never said 80K consultants were in Calgary, but in the oil patch I suspect that number's not unreasonable. Even those that don't work in Calgary often live here.

Higher end houses are definitely moving, albeit slower. Hence the disconnect of nearly 12% between "average" and "median" sales price in Calgary right now.


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## fraser (May 15, 2010)

In his recent blog Mike Fitou, a well known Calgary realtor, claimed that the average price of a Calgary home in FEB was high/overstated because of a higher than normal number of home sales in the $1m plus sale price. He also referenced the TD bank study.

I can say, with a very high degree of certainty, that the cost of renting has been significantly less than the cost of buying for the past 30/36 months. This has been our experience in the condo market and is the reason that we have remained on the sidelines of the market.

Our realtor told us that Calgary has another anomaly. A high percentage of homes where both spouses work are homes where they both work in the O&G sector. Not certain if this is factual. But day cares are certainly laying off staff as parents pull their children out. My son is a high school teacher. He says the public schools in Calgary are seeing an increase in enrolment as parents pull children out of private and charter schools.

I believe that we will really start to see the fallout in 2H16 and 1Q17. I hope that I am wrong. The EI numbers do not tell the complete story because the O&G sector has so many self employed independent contractors who do not pay and are not eligible for EI.


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## Just a Guy (Mar 27, 2012)

peterk said:


> Why do you all say you can't time the housing market? Perhaps it's tricky during some periods in some locations? and everyone who has gotten burned by Toronto/Van that didn't buy over the last 10 years are upset because their timing didn't work out?
> 
> Alberta is a one trick pony that just got sent to the glue factory. Calgary housing prices haven't come down all that much yet. I don't think you can apply the efficient market hypothesis to the housing market like you can stocks, things move slowly.
> 
> I will eat my hat if Alberta housing prices are not lower in 1 year than they are today. I would love to short it if I could.


Timing the market implies you know when you've hit bottom, or are close to it. Anyone with half a brain could predict that Alberta housing prices will be lower in a year on average. However, can you tell me if the place I bought today will be worth more or less in a year? If I bought one particular place today, well below average rates, fix it up, and have it appraised much higher will it be worth less in a year than the appraisal (which is usually very conservative in a downturn), will it be less than I paid for it? If I hadn't bought it today, would it still be on the market in a year considering it was priced so low to begin with?

I agree houses in general for Alberta will be down, but will they come down as far as something being sold at fire sale prices? Will they continue to come down for two years? When exactly is the "right" time to buy? What if only a certain portion of the market falls, say >$1M, something I'm not interested in...what if lower priced houses don't fall.

Timing the market, especially when each house has a unique price and reason for sale, isn't as simple as you may think. In general terms we can make predictions, but getting the specifics correct is a lot harder. I say this from someone who is constantly buying places, I buy in hot markets and I buy in stone cold ones, I don't look to closely at the "market" in general, I look at the price of the place I want. So far, none have ever dropped lower than what I've paid for them, despite downturns...hopefully that continues.

Some of my best deals came after years of a booming markets. Most other investors seemed to have given up looking because prices had gotten ridiculous. I had no competition (competing bids) and was able to pick up places well below market because people wanted them gone and I was the only one with an offer. In a down market, investors come out of the woodwork and start to bid up prices on places.


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## peterk (May 16, 2010)

Fair enough, but I don't think that market timing is implying that I know where the bottom is, only that I think I'm pretty damn sure it'll be lower next year than this.

That said, my thought on the "bottom" are that it's not going to be a sharp bouncing bottom at all in the Alberta housing market. That even if oil recovers rapidly this year, housing will languish for many years to come, very slowly creeping back up as confidence is restored and jobs start to trickle back into the province in small numbers.


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## Numbersman61 (Jan 26, 2015)

For those suggesting that million dollar homes in Cagary are selling - not in my neighborhood. There's been a few listings in the past 18 months but not one sale. One house owned by a lender has had it's price drop 25% - someone's getting desperate.


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## CalgaryPotato (Mar 7, 2015)

The average prices haven't dropped enough in my opinion to buy considering all the uncertainty. There are some desperate sellers, so if you want to target specific places, and throw some lowball offers, you might get a relative steal. 

But realistically the houses here are still priced based on future growth of the city, not a slow decline, and it's anyone's guess what the mid-long term future of Calgary holds right now.


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## Brian K (Jan 29, 2011)

I too agree that there are LOTS of contractors who have been laid off and they aren't part of the reported stats - either in layoffs or in EI numbers. And these folks were probably getting 30% more $$ than the equivalent employee. I've talked to many that were living pay cheque to pay cheque. 
Reminds me of the early 80's bumper sticker "Please God let there be another oil boom. This time I promise not to piss it all away". History repeats itself yet again. Hopefully my kids will learn. 
Would I buy a house in Calgary now? I guess it would depend on how secure I though my employment was - not based on the price of the house but there will be better deals this summer probably - unless someone drops a bomb somewhere in the middle east. As soon as the experts think nothing will change, watch out!


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## AltaRed (Jun 8, 2009)

I think there will be better opportunities through the summar and fall (barring a middle east crisis as mentioned above). I haven't seen any suggestion that the foreclosure market is picking up yet, is it?


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## Brian K (Jan 29, 2011)

I think the banks learned a valuable lesson on foreclosures in the early 80's and are working out payment (interest only) arrangements with 'owners'.

They realized that foreclosures meant that:
1) the previous (mad) owners that were getting the boot didn't leave the house in good shape. Holes in walls, appliances removed, hot water tanks and furnaces removed too.
2) Banks were on the hook for property taxes, utilities, insurance, up keep - lawn mowing, sidewalk and driveway shoveling in winter. Boarded up houses (and there were many) didn't look good and were hard to sell.
Better to have someone paying interest and the other costs than for them to be the banks problem.


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## Just a Guy (Mar 27, 2012)

AltaRed said:


> I think there will be better opportunities through the summar and fall (barring a middle east crisis as mentioned above). I haven't seen any suggestion that the foreclosure market is picking up yet, is it?


It's amazing that people in other provinces never seem to "see any suggestion" of things, especially in this day of Internet access...

This from May last year...

http://business.financialpost.com/n...rcing-alberta-homeowners-into-tough-decisions

Up 24% for the year...

This from January this year....

http://www.cbc.ca/news/canada/calgary/calgary-foreclosures-spike-alberta-economy-1.3400803

Up 30% more...

Of course, here's a piece from February which says that despite a major drop in prices, things may not really be bad...if you keep your eyes closed I suppose.

http://calgaryherald.com/storyline/fortney-are-calgary-homeowners-really-on-the-brink

Of course, no signs of a downturn in Calgary looking out the window in BC or Toronto I suppose...investors need to look outside their comfort zones and see what's going on around them if they want to take advantage of opportunities or remain successful.


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