Comments on: Mid-June Calgary Real Estate Update

By: Gary

Gary — Tue, 23 Jun 2009 20:05:33 +0000

To Mike:
Yes ,yes, and yes!!! You 100% right.
Gary.

By: Chuck

Chuck — Tue, 23 Jun 2009 17:16:43 +0000

While rising interest rates may eventually become a real affordability issue I’m not sure that we’ll see 7% by the end of the year. The economy has just been through a proverbial car crash and is sitting in ICU. Everyone is talking about inflation taking place but it sure isn’t happening yet- not to any degree. For bond rates, and government intervention, to end up driving rates to 7% or higher would certainly put a damper on things. I can’t see it happening personally, not yet, not this year, but my crystal ball doesn’t work and I’m willing to bet yours doesn’t either.

The wait and rent argument is a little too vague for my tastes. Depends where, what, and how you buy- if you choose to. If you don’t choose to buy you’d better be a savvy investor to come up with any decent return on your money and if inflation is the wave of the future I’d much rather be invested in hedges like real estate and precious metals- not stocks and bonds. If I had to wait for the pricing to come down to “affordable” levels to buy a real estate hedge- well- most other folks would already be on that band wagon too thereby likely driving the price up- or rates would be so terrible it wouldn’t be worth jumping into the market.

Most people told me I was retarded for buying a house a few years ago and paying the price that I did. I ended up selling recently with an attractive profit and bought another in the inner city with a very long investment horizon (unless of course a great opportunity comes by to sell). People are telling me I’m crazy once again. These same people told my parent’s generation that they were nuts for buying at the price they did many, many years ago. Guess we’ll see.

By: Mike

Mike — Tue, 23 Jun 2009 16:13:26 +0000

Chuck // “Wouldn’t you think that would stimulate sales as people rush to lock in at a lower rate before they get even higher? I think that’s what is happening right now?

The question in my mind is at what rate do buyers decide that its just too expensive and put off their purchase?”

I agree with you, new buyers are most likely rushing to purchase before rates go up, thinking only of the short term smaller issue (save money on interest) not the long term issue (housing prices going down and rates to go up).

Fixed mortgage rates at 7% (end of this year) is my guess and as the spread increases people who cannot pay off their house in 5 years would be best to lock in and have high risk tolerances.

This all happend in the 80′s RE boom, and those who bought then took 20 years for their purchase to make ANY money at all. 20 years is a long time to wait. But 1-2 years to wait till the market bottoms out is much shorter.

Be smart with your money, wait and rent.

Mike

By: cj

cj — Fri, 19 Jun 2009 10:58:59 +0000

i think this whole interest rate issue is a huge corundum for buyers. The spread between variable and fixed is too large and I would bet the vast majority of buyers are going variable because its “cheaper”. The problem will be…when do i lock in and when I do, can I afford the bump….it has to be a scary proposition for people who are actually thinking ahead!!
Mike, what are you seeing from new buyers?
tks

Mike Fotiou says: Those that adhere closely to a budget are deciding to lock-in for the 5 or 10 year rate to give them some piece of mind. Others are taking advantage of the low variable rate to pocket money now. It really depends on the situation and mindset of the buyer.

By: Mike Fotiou

Mike Fotiou — Thu, 18 Jun 2009 01:18:04 +0000

I believe that those that want to purchase would just opt for the variable rate which is still at its historical low, especially if the fixed rate keeps climbing. But with interest rates with no where to go but up, those choosing to go the variable route should budget for higher interest rates in the next few years.

Some mortgage products allow you to hedge, having part of your mortgage under a fixed rate, and the other part with a variable rate.

By: Chuck

Chuck — Wed, 17 Jun 2009 15:51:48 +0000

Mike,

“Few want to buy when rates are going up”

Wouldn’t you think that would stimulate sales as people rush to lock in at a lower rate before they get even higher? I think that’s what is happening right now?

The question in my mind is at what rate do buyers decide that its just too expensive and put off their purchase?

By: Mike

Mike — Wed, 17 Jun 2009 15:45:48 +0000

As Mortgage rates start to raise it will be interesting to see what effect it has on sales. Few want to buy when rates are going up, fewer still when the Real Estate market is in “uncertain times”.

Will 5 year, 7% fixed rates be the norm by December?

Mike