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Discussion Starter #1
Quite a bit of news today about the possibility of a real estate bubble ready to burst in a number of big cities. Living in Calgary, it has been incredible growth over the past few years. As mentioned in the herald today:

Before 2000, house prices tended to hover with a narrow range of between three and four times provincial annual median income. Today, house prices are anywhere from 4.7 to 11.3 times the median income, says the report (Canadian Centre for Policy Alternatives).

Yes, yes, it's just a report, but inventories are high, some reports of people starting to struggle with mortgage payments, relatively high unemployment, etc...honestly, it has me reconsidering the house-hunting we are currently doing (which would move us from a ~500k home to ~650k home to be closer to schools, work, public transportation, etc). Maybe I should save up some more and see how things pan out over the next year rather than taking on a 150k mortgage...

What is your crystal ball saying?
 

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My crystal ball is saying do not buy right now, there is a correction occurring. If you do not plan to sell or buy in the future who cares, pay your mortgage off, live and die in your house.
 

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I'd hold off on a purchase right now (for most parts of the country). No point buying after a huge run up when negative headlines are just starting to come out.

Sales volumes are also way down in big markets like Vancouver. Prices haven't moved...yet....

That being said, I've been wrong for a couple of years now....!
 

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I'm kinda torn on this... on one hand, as a property owner in Vancouver it would really hit my net worth statement hard if there was a big real estate correction. But then again, a big crash would mean that we could finally get into a detached house with a yard for less than the ridiculous 700k it costs today. Still don't know which situation I'd prefer.... :confused:
 

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Prices have already corrected somewhat from the peaks set in Spring this year. In our Ottawa neighbourhood, *asking* prices are off about 6% and homes are staying in the market longer.

I don't think anyone can time the housing markets either, so if one has a healthy downpayment and can easily handle the mortgage and all the expenses that come with owning a home, they may want to go for it.
 

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To OP, the common advice is to upgrade in a down market. Because Calgary is going through a down period, this might be the time to upgrade. If house prices correct another 25%, your current home will the worth $375. But the upgrade will also be less.

The only other action would be to try to sell and then rent in the new neighborhood. But that might compromise your life choices too much?
 

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I have been pretty negative on RE since the crash of the early 90's in Toronto. Good place to live but don't like it as investment. I think some kind of correction is coming but who knows. Might just be a plateauing. Our place in Canmore is probably down 10% from mid 2007(the peak). I wouldn't be buying right now unless you know....a great place for a seemingly great price.
 

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Discussion Starter #10
Thanks for the advice so far; point well taken about the parallel fluctuation in price in both my current and potentially-future-home...As implied in my comments above, I feel hesitant about the market in general, so looking to hear other points of view!
 

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To OP, the common advice is to upgrade in a down market. Because Calgary is going through a down period, this might be the time to upgrade. If house prices correct another 25%, your current home will the worth $375. But the upgrade will also be less.

The only other action would be to try to sell and then rent in the new neighborhood. But that might compromise your life choices too much?
Challenge is:
1. Are there buyers out there right now in a down market?
2. Out of this pool of buyers, how many can/will spend $500,000 in a down market?
3. Is the OP willing to accept that he/she will have to price lower than market value to catch buyers if market keeps falling?

Not an easy choice. Good luck.
 

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I think the Ontario market is fine. There are lots of safe-guards in place, including new rental rules that will chill speculation.

I dislike politics, but Rob Ford will do away with the land transfer tax. That will ignite the Toronto condo market.

We also have some new immigration trends to Toronto and the GTA. Vancouver is simply so expensive that lots of wealthy Chinese emigrants are now coming to the GTA...good news for all of us.
 

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I don't think the presence or absence of the land transfer tax will ignite the market. Simply put, it didn't have a significant impact with the new tax, except to shift some of the buying prior to the land transfer tax. If it does have an impact, great. As you said, the loss of speculative effect will hurt prices.

I think the underlying fundamentals of a slowing economy, a slow return to more normal interest rates, and also the cyclical housing correction means that prices aren't going up anywhere soon.
 

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I think the Ontario market is fine. There are lots of safe-guards in place, including new rental rules that will chill speculation.

I dislike politics, but Rob Ford will do away with the land transfer tax. That will ignite the Toronto condo market.

We also have some new immigration trends to Toronto and the GTA. Vancouver is simply so expensive that lots of wealthy Chinese emigrants are now coming to the GTA...good news for all of us.
Wishful thinking I suspect.
 

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For a number of reasons I doubt we'll see a spectacular flame-out like we saw in Arizona, etc. But I don't think a 10 - 20% decline is out of the question. I think 3 or 4 years of price stagnation is probably more likely. As rates rise, affordability will worse, and prices are already fairly high. I can't see major appreciation from here.

On the bright side, Toronto has pretty solid long-term fundamentals. There's a high population growth rate with the immigration influx to absorb new units and the economy is pretty solid and well-diversified (no, it's not all car manufacturing). So the trick is guessing the short term fluctuations, and I think that requires a crystal ball.
 

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I think the Ontario market is fine. There are lots of safe-guards in place, including new rental rules that will chill speculation.

I dislike politics, but Rob Ford will do away with the land transfer tax. That will ignite the Toronto condo market.

We also have some new immigration trends to Toronto and the GTA. Vancouver is simply so expensive that lots of wealthy Chinese emigrants are now coming to the GTA...good news for all of us.
Nothing will ignite the Toronto's RE market. Here are some stats for all wondering if there will be a correction.

Toronto (416) - May 2010 - $493,265
Toronto (416) - Mid-August 2010 - $425,874

Toronto (416) is down $67,391 or 13.7% since May 2010

GTA - May 2010 - $446,593
GTA - Mid-August 2010 - $412,934

GTA is down $33,659 or 7.5% since May 2010.

May 2010 wasn't that long ago either.

We are already in correction folks and predictions from bank economists and the like, that we'll see single digit correction from peak to through are laughable at best.

Here are the sources for my calculations above:

http://www.torontorealestateboard.com/consumer_info/market_news/news2010/pdf/nr_market_watch_0510.pdf

http://www.torontorealestateboard.com/consumer_info/market_news/news2010/pdf/nr_mid_month_0810.pdf
 

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Is that the National Bank index? You have to be careful with average home sale prices because some indices use methodology that gives you a distorted view of average home prices.
 

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Discussion Starter #18
Toronto (416) is down $67,391 or 13.7% since May 2010

GTA is down $33,659 or 7.5% since May 2010.

May 2010 wasn't that long ago either.

We are already in correction folks
Thanks for the figures; I can see that depreciation of home value is occurring out west as well, but don't have the stats to back it up more than just anecdotally (I'm sure they're out there though). No doubt some correction is happening, and although I know that catching prices at the bottom is like catching a falling knife, any info shared is worth looking at.
Thanks again for the continuing thoughts!
 

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I just want to point out one note of caution in looking at average house prices. It's the old fallacy of looking at statistics. I think using average house prices are dangerous, because the only true comparison would be an equivalent house in the same location, what is its change in value over a specific time period (say, a year). However, a number of factors may change an average house price comparison easily, such as one sector of the housing market being favoured over another sector.

For example, if the condomonium re-sale market took off last year, but the single detached homes took off this year, I'd expect the market to have gone up rapidly on the "average price".

Similarly, if one area of the city with small homes took off this year, it may artificially depress the prices. So I'd take a look at "price" factors as only 1 aspect, especially when you don't take seasonal effects into account.

The year over year comparison is slightly better, but it's still cross-sectional snapshots. It's truly not the "apple to apple" comparison. The only way is to put the same house on the market, and there's no way of practically doing that.

Over this year, I think what you're saying is true, with higher housing inventories, and comparison by districts showing a stabilization, but I'm not sure the absolute correction is truly 10%. I hate it when TREB says the price has gone up/down x%. Without looking at the sectors with a finer toothed comb, the aggregate figures don't mean much.
 
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