Comments on: Budget & Plan Ahead For Higher Interest Rates

By: Bottomed Out? «

Bottomed Out? « — Thu, 25 Jun 2009 05:57:21 +0000

[...] Even with interest rates so low, I encourage those buying to budget enough for increased interest rates for when your 1-5 year term is up and you have to renew. You can read my blog post: Budget & Plan Ahead for Higher Interest Rates. [...]

By: Jones

Jones — Fri, 27 Mar 2009 15:20:20 +0000

We’re waiting for the market to settle down but it seems to be slow to correct. The number of layoffs, increased foreclosures and the large increase of bankruptcy claims are, in my opinion, leading indicators of markets to come. If interest rates increase even 1% with depressed market prices you may see a huge increase in foreclosures and a rapid decline in housing prices.

But that’s just my opinion.

By: Cory

Cory — Wed, 18 Mar 2009 00:37:02 +0000

The other problem is people only look at mortgage payments, not carrying costs which are quite high now too. Then the failure to factor in a possible illness o rhealth issue and it all falls apart very quickly.

Add parking fees at the park and ride and there is no room for error!!

By: Anon

Anon — Mon, 16 Mar 2009 16:29:59 +0000

I agree with you. We are looking at under 300k as our limit, and we both work with reasonable income. There is no way we could afford 400k house – though the mortgage brokers keep insisting we can, and have pre-approved us for that amount.

By: Mike (authentic)

Mike (authentic) — Mon, 16 Mar 2009 08:47:28 +0000

“REMAX released their First Time Buyer’s Report this week. I’m a little surprised to see that they consider up to $400k as an entry level price point for a first time buyer. With average prices hovering just above that, I bet they consider prices to be in line with what Calgarians on average incomes can afford…”

I would myself consider a entry level price point to be $230-270k. Our first starter home in 2004 was $178k in Millrise and we did ok with the mortgage at 4.65% 5 yr with 10% down with Calgary average incomes. We stayed away from looking anything over 210k though.

I can’t see incomes changing by 100% in 5 years.

Mike

By: Cory

Cory — Mon, 16 Mar 2009 03:36:57 +0000

Good points Mike. Unfortunately, people only see today/short term and I expect a big bloodbath when people go to renew their mortgage and people find they cannot afford even a .5% rate increase if they maxed out to begin with, which alot do.

House and condo prices have a long ways to go yet before they really become affordable and match the median income levels. The numbers still do not balance and when interest rates inevitably climb real estate prices will have to drop.

The best thing to do is sit in cash and wait for inflation to come roaring in an simply lock in your cash for a double digit interest rate paid to you rather than paying it to the banks via a mortgage.

The problem with my proposal is people simply do not want to wait and will buy an oversized house/storage shed they cannot afford anyway. And two, generations have been brainwashed that real estate is the only and best way to financial freedom, which is simply not true. I have always sat and waited for things to come to me even if I have to wait a few years for it to happen and we now sit in a great cash position with no debt today because of it. We also lived for “free” for over 14 years because of our real estate moves at the right times. So it can be done. Now we are sitting and waiting (again) for the market to continue to correct, and it will continue to do so, until we buy again, or not.

By: Mike Fotiou

Mike Fotiou — Fri, 13 Mar 2009 16:35:53 +0000

Alberta launched new building and fire codes that builders have to adhere by before May 3rd. Although this is commendable, it's a shame it wasn't implemented a year or two earlier when thousands upon thousands of homes were being built. Will new home builders absorb the approx. $10k hit, or pass it on? Calgary home builders feel burned by new Alberta fire safety rules - REMAX released their First Time Buyer's Report this week. I'm a little surprised to see that they consider up to $400k as an entry level price point for a first time buyer. With average prices hovering just above that, I bet they consider prices to be in line with what Calgarians on average incomes can afford...

By: Mike (authentic)

Mike (authentic) — Wed, 11 Mar 2009 21:16:19 +0000

“As well, CREB now has a Cumulative Days on Market Stat. This is a combined total of the Active Days on Market, and the Days on Market of a listing of the same property that was on the market within 30 days of the most recent listing. In order for the CDOM to reset to zero now, a property must be off the market for at least 31 days. ”

Finally, a useful DOM stat!

But why would CREB do it now when they know DOM is up and it could hurt them? I don’t see a “positive spin” for them in doing this…Won’t it will remove the “magic bullet” for many a realtor out there as well…?

For the consumer, it’s great news I believe.

Mike

By: cj

cj — Wed, 11 Mar 2009 15:35:31 +0000

hi mike, i have a question...I was speaking to a realtor yesterday who said that people are not buying new homes but are instead opting for existing. As a result builders are dropping prices for new construction (around $125/sq ft). Are people not buying because they are worried about locking in a price and when the house is finally built and they try and get financing the value has dropped and can't get a mortgage? Are you seeing or hearing this to be true? thanks CJ Mike Fotiou says: Hello CJ, good timing, I just posted a link to an article above regarding new home prices. I'm not sure what the price drop per square footage is industrywide, but this was a quote from one builder last month: Allan Klassen, president and managing partner of Albi Homes "I can confirm that to buy a 2,500-square-foot two-storey Albi home today versus one year ago our prices have come down by over $100,000." (source) So, it's down at least $40/sq ft. for them (or at least for that model)

By: Mike Fotiou

Mike Fotiou — Wed, 11 Mar 2009 15:33:49 +0000

Thanks for your thoughts, Mike & Talking. New home prices continued to decline in Alberta - Calgary 6.5% year-over-year (Edmonton at 10.4%) As well, CREB now has a Cumulative Days on Market Stat. This is a combined total of the Active Days on Market, and the Days on Market of a listing of the same property that was on the market within 30 days of the most recent listing. In order for the CDOM to reset to zero now, a property must be off the market for at least 31 days. I'll write up a post and compare the DOM stat to the more accurate CDOM stat. I think this is a great update to better reflect how long homes are staying on the market.