Current public sentiment towards the housing market?

Status
Not open for further replies.

CelloPoint

Frequent Poster
Messages
75
Just to put a little bit more perspective on this discussion.

My aunt lived in Calgary during the 1980s property crash. She was chatting to me recently about the madness in Ireland and shares similar views to me.

We are re-living history here in Ireland. The young people my age have never experienced hard times, let alone mediocre times, and we're all expected to be wearing prada shoes now.

Calgary's economy was heavily dependent on the oil industry: In Ireland, I believe our equivalent oil industry is US FDI, the US economy, and the oil well of money that is German pension funds (borrowed at exceptionally low interest rates).

Anyway, here's the article below. Even the Canadians didn't learn from the hard lessons of the 1980s - greed is a funny thing.

http://www.calgarysun.com/cgi-bin/publish.cgi'p=129737&x=articles&s=lifestyle
Calgary Sun said:
Home prices are going through the roof in Calgary.

HAMMERED ... So you're going to buy a newly built home and quickly flip it for profit' Hold your horses! Experts say the desire to make easy money by buying and selling property is often a ticket to bankruptcy.

The average house price is now above $300,000 and we're closing in on Toronto. So rapid is the rise, the term real estate doesn't seem relevant any more? Unreal Estate is more fitting. In the Calgary Sun's five-part special series on residential realty, we're profiling this red-hot market. We'll examine where the market is and where it's going and we'll provide tips on buying and selling. As well, readers will gain insights on the pros and cons of the current home realty scene. Today, we look at how times can change on a dime.

The headlines of the day promised Calgary's good times would always roll.

But with the turn of the decade, homeowners in the city were heading into the 1980s' perfect storm of economic trouble.

And with the current housing boom, both economists and those who lived through the last bust are offering the following advice: Sure, be optimistic, but also be careful with your cash.

'We learned the hard way,' says Al Westman, whose former company B&H Homes was one of the casualties when the bottom fell out of Alberta's economy in the 1980s.

'There was literally hundreds and hundreds of houses on the market lower than we could build them at.'

High corporate debt, runaway inflation and interest rates soaring near 20% ' coupled with the then-federal government's National Energy Program ' led to massive layoffs and home and business foreclosures across the province as activity in the oilpatch ground to a halt.

And while he's quick to point out it's unlikely we'll be crashing into an economic iceberg anytime soon in Wild Rose Country, Mike Percy, a University of Alberta professor who specializes in energy issues and the area's economy, says slowdowns are a fact of life.

Our economy, though now more diverse, is also still largely dependent on energy prices, he says.

'Inevitably, there's going to be a recession ' the business cycle is not dead,' says Percy, adding all it would take is a major incident in the U.S. or China.

'When it's going to be and its severity is hard to predict ... in the absence of those types of things we can't control, the economic fundamentals look pretty good, but one has to be aware there is still going to be a turning point.'

Bank of Canada brass has indicated if inflation remains in the 2% range, any interest rate hikes should remain modest.

But even a minimal increase would hurt with city home prices currently rocketing through the roof.

In February, the average home in Calgary went for $304,560.

Assuming a downpayment of $30,400, or 10%, and 25 years amortization, monthly property payments at 6% are about $1,754, but at 8% that would rise to $2,092 and a 12% rate would cost $2,829.

In 1981, when many mortgages were a whopping 21%, owning that same house would have set you back about $4,600 a month.

Former Calgarian Brian Norton says he remembers buying a 2,100-sq.-ft. house in the Woodlands area in December 1979 and being stuck paying rates close to that when he renewed his mortgage a year later.

'At the end of that year, our rates went through the roof,' says Norton, adding mortgages had previously been closer to 12%.

'For several years, all we did was struggle to make those payments and we ran up a bunch of debts.'

Adding insult to the injury of his $2,000-a-month housing bill was the fact property values plunged because the cost of borrowing meant many people couldn't afford to buy ' and many of those who did defaulted and faced foreclosure.

'We couldn't have sold it and even got enough to pay the mortgage,' says Norton, now 66 and practising law in Kelowna.

'We were on a pretty tight budget then.'

About the same time, others, such as Elsie and Peter Moore, found $4,000 added to the price of their $74,000 Whitehorn-area honeymoon home literally overnight.

'There was just no way we could afford that,' recalls Elsie Moore.

When the then-newlyweds made their story public, another developer came to their rescue, offering to build them another house at the original price, and Moore says they were then able to weather the storm.

'The house wasn't built for five months after we got married, so
we lived with Pete's parents, but it
all turned out in the end,' Moore says.

'I just thought if we don't sell it, we're not going to lose anything so just hang onto it and hope things get better ' and they eventually did.'

Like the Moores, those who carefully control their finances will probably survive any future downturns, but those swimming in red ink hoping things will get even better will probably drown financially, Percy warns.

'Buying houses to flip and make quick profits in anticipation of ever-increasing housing prices is a ticket to bankruptcy in the longer term,' says Percy.

'They will get burned ' it's only a question of when, not if.'


Builders who balance their books well should also stay afloat, says Westman, who's now 78 and went on to help found his son Jay's firm, Jayman MasterBuilt.

'Today, nobody's carrying anybody's credit ... everybody pays their bills on time,' says Westman, adding Jayman maintains a financial buffer ' allowing it to complete any work it's already started.

'If we can't pay for them, we don't build them.'

------

- RICH PRICES LEAVE CITY'S POOR IN THE COLD

If nothing more is done to make housing in Calgary more affordable, those who help the city's poor say one thing is certain ' their business will continue to boom.

'There's no question about it,' says Dermot Baldwin, executive director of the Calgary Drop-In Centre.

'The market's giving us less options to place people and less hope for people coming in who could have otherwise made it.'

Baldwin estimates the client base at his centre is up about 15% from last year and with costs on even the lower-end homes soaring, the pool of people who qualify as poor in Calgary is increasing.

'I have a staff member who paid $480 for an apartment with free parking and cable ' the same place 3+1/2 years later, it's $780, plus you now have to pay for the cable and the parking,' says Baldwin.

Now the rush for homeless help isn't confined to the Christmas season, either, adds Diana Segboer, the Inn from the Cold Society's executive director.

'We have been full of families in March, which means no single women or single men are getting in ' we're definitely at an all-time high,' says Segboer.

Serious government help is about the only thing that will ease the crunch for the poor in this market, says Terry Roberts, president of the Calgary Homeless Foundation.

'The one big difference from the housing boom of the 1980s is interest rates are so much lower now ... however, with high purchase prices, land and construction costs that advantage is more than wiped out,' says Roberts.

'We're not keeping up now, but we hope the new federal government, and the province, will develop long-term affordable housing programs.'

-----

- NEW AGE TAXING ON SOME

Soaring house prices won't necessarily result in higher taxes for Calgary homeowners ' so long as your property isn't on the leading edge of inflation.

Deputy city assessor Roy Fegan says Calgary's Market Value Assessment system isn't designed to profit from rising real estate prices, and only those homes that increase in price by more than the city average will end up with a higher tax bill.

'We refer to it as revenue neutral ' if city council could operate on the same budget, with the same money, it would actually lower the tax rate,' said Fegan.

It comes down to where you live in Calgary, and whether your neighbourhood is rising in price faster than the average.

Each year, the city's assessors determine what the average price increase was for Calgary's 400,000 homes over 12 months, measured from July to July.

Between July 2004 and July 2005, the average increase was 8.4% ' homes that rode in price by more than 8.4% saw a tax increase, and those that increased by less, saw a tax decrease.

Because a select few communities are increasing in value faster than others, residents there are seeing substantial increases in the annual bills.

'When values increase, they don't increase uniformly across the city,' said Fegan.

'The city centre increases more than extreme suburbs.'

This year's tax bill, which will be mailed out in June, saw homes in communities such as Elbow Park and Roxboro increasing in price by more than 30%.

Because those desirable, inner-city mansions rose so much, it actually resulted in a tax decrease for 63% of Calgary homes.

What Market Value doesn't take into account is whether city council increases taxes in a given year.

-----

THEN AND NOW

- Energy Policy

The National Energy Program (NEP), enacted after the 1980 federal election by the government of Pierre Trudeau, was billed as a corrective measure prompted by a more than 150% rise in world oil prices.

It was designed to redistribute wealth, stabilize prices, and give Canadians more control over their own energy sector ' but it served only to plunge Alberta's economy into recession.

World oil prices fell on their own shortly afterwards.

Subsequent federal governments have vowed a program such as this will never be enacted again.

Analysts Goldman Sachs are sticking to their forecast the price of Alberta benchmark West Texas Intermediate crude will average $69.50 US a barrel, just shy of its record high, over the rest of 2006.

- Housing

In February this year, the average home in Calgary went for $304,560, up 26% from the same month in 2005.

The average local home resale price in December 1982 was $100,000 down $7,000 from the same month in 1981, but at the time some owners saw their property values crash by nearly 30%.

Housing starts in 1982 were 9,599 down from the 1978 record 15,382.

Total housing starts for 2005 were 13,667, down 2% from the previous year, but besting the 13,000 mark for an unprecedented fourth year in a row.

- Inflation

In July 1982, the consumer price index (CPI) in Alberta was 12.2%, compared to the national average 10.8%.

To stem that inflationary tide, federal regulators raised the Bank of Canada's trend-setting lending rate to nearly 20% ' meaning mortgages in the 21% range were common.

Currently, the national CPI, a measure of inflation used by Statistics Canada, remains in the 2% range and, as long as price increases stay in that range, the federal bank says rate hikes, if any, will remain modest.
 

whathome

Frequent Poster
Messages
158
This is something that really annoys me with Estate Agents.

This house is acutally in Kilbarrack not Sutton. Kilbarrack, Coolock, Donaghmede and Bayside have all disappeared over the last 5+ years. They've become Raheny and Sutton. Same with areas of Killester, Marino and all of Dollymount becoming Clontarf

Wonder how long they'll continute to get away with this in a falling market. They should be brought to book for false advertising at the very least.

Yep, area creep has been going on for years...

- Coolock has become Artane or Raheny
- Ballymun has become Santry or Glasnevin
- Eastern Swords has become Malahide
- Finglas has become Glasnevin
- Some of Artane has moved into Beaumont

Same on Southside...
- Ballybrack has become Killiney
- parts of Dundrum are becoming Stillorgan
- Sallynoggin moving into Glenageary
- Cornelscourt and Leopardstown edging towards Foxrock!

A better postal code system should sort all that out :)
 
O

OilKing

Guest
Not sure how many people would be on for this but as I've seen on the popular UK website www.housepricecrash.com, they have organised pub meetings in some area's where posters (bull and bear alike) can meet up and discuss their favourite threads over a few pints.
PS. Could get messy if room305 and tententwenty get their beer fueled hands on each other.
 

CelloPoint

Frequent Poster
Messages
75
It seems stories like this regarding recessions brought about by housing bubbles popping are becoming more commonplace.


http://www.rte.ie/business/2006/0914/imf2.html
Are we suggesting that the ground is being layed for the crash? Can the US crash be used as a scapegoat, something that 'we could never have foreseen'? How does the US property market affect the Irish one anyway? Surely, it's the US economy as a whole and not localised property bubbles that we should be worried about?

Anyway, I don't trust anything I read about property anymore. We're a basket case. Our property bubble is massive - it is absolutely huge for a small island on the side of Europe with poor infrastructure and unsustainable economy.

AFAIC, this country has had no governance over the last 10-12 years. We've been on auto-pilot - the vested interests and lobby groups are the ones who are running the place to the demise of others. It's a sad state of affairs when my neighbour at work just spent 2 hours and 20 minutes in a car from west dublin this morning, and is absolutely soul destroyed with worry about his mortgage, his childrens' music lessons and his wife whom he hardly gets to see.
 

Howitzer

Frequent Poster
Messages
1,459
Yep, area creep has been going on for years...

- Coolock has become Artane or Raheny
- Ballymun has become Santry or Glasnevin
- Eastern Swords has become Malahide
- Finglas has become Glasnevin
- Some of Artane has moved into Beaumont

Same on Southside...
- Ballybrack has become Killiney
- parts of Dundrum are becoming Stillorgan
- Sallynoggin moving into Glenageary
- Cornelscourt and Leopardstown edging towards Foxrock!

A better postal code system should sort all that out :)
FYI Dublin now consists of 3 areas: Castlenevintarf, Lucan and South Dublin.
 
S

somerset

Guest
I would be interested to see what the extent of the impact of this thread has on the housing market.

I am not getting carried away with the importance of the ramblings of a group of underoccupied obsessives ........however having already influenced a newspaper article, could such aspects as the widespread identification of actual cases of falling house prices cause a more rapid deflation of the market than would otherwise be the case?.

In previous market crashes knowledge of the instances of discounted prices would have been limited to vendors, buyers, EA's and their friends until it would be latched upon by the mainstream media. IMHO, the media outlets are taking their lead from a better informed public (AAM users).

Who wants to set up a website for properties that have dropped in prices ? bet that would be popular and get things rolling a bit quicker:p
 

SLAPPY

Registered User
Messages
22
Well its an ill wind in fairness. Some businesses will do well, others will utterly collapse. How would you go about crash-proofing yourself (if this really is the last gasp)?

I was just thinkg the same thing myself tententwenty. Obviously a recession would affect each of us, but those who have already cashed out of the housing market and are sitting on a pile of money will be kings of the new world in 6 years. All the people who are swimming in debt and owe the bank 300,000 on a house that is now only worth 175,00 won't be much fun to be around. People with a safe gov't job should be able to sleep pretty well at nights. The only way to crash proof yourself is to have more cash and less debt.


A few thoughts on business that shouldn't suffer too much in a recession:
1. Pubs (Ireland will never change)
2. Chippers and any cheap eats
3. Career Counsilors (all the unemployed builders and auctioneers will need to do something with their lives.)


Businesses that will be hurt badly by a recession
1. Upscale restaraunts (sorry Lemongrass, I love ya, but I won't be able to afford ya)
2. Luxury car dealers (not a big demad for hummers and Land Rovers)
3. Builders and everyone involved in the housing industry (a little obvious)
 

batty

Frequent Poster
Messages
102
"In previous market crashes knowledge of the instances of discounted prices would have been limited to vendors, buyers, EA's and their friends until it would be latched upon by the mainstream media. IMHO, the media outlets are taking their lead from a better informed public (AAM users).

Who wants to set up a website for properties that have dropped in prices ? bet that would be popular and get things rolling a bit quicker:p"

Nooooooo- Can you all keep quite please for the next month or so?? I'm trying to sell a house here!! (only joking)
 

Savvy

Frequent Poster
Messages
116
Does anybody know when in the month do Daft update their house price index? At the moment its only up to July.
 
S

SHARP

Guest
Yep, area creep has been going on for years...

- Coolock has become Artane or Raheny
- Ballymun has become Santry or Glasnevin
- Eastern Swords has become Malahide
- Finglas has become Glasnevin
- Some of Artane has moved into Beaumont

Same on Southside...
- Ballybrack has become Killiney
- parts of Dundrum are becoming Stillorgan
- Sallynoggin moving into Glenageary
- Cornelscourt and Leopardstown edging towards Foxrock!

A better postal code system should sort all that out :)
Not only that

Leixlip, Celbridge and Maynooth are now considered "Dublin" to many people I know who live there!
 
Status
Not open for further replies.
Top